Tariffs have raised major headwinds on the US and the global economy, leading the International Monetary Fund to cut its 2025 growth forecast.
President Donald Trump’s “mutual” tariffs on April 2 not only caused stocks to be swept. S&P 500 It has fallen 9% since taxation began, but measures have also been occurring from other trading partners.
“This in itself is a major negative impact on growth,” the IMF said in its April 2025 executive summary of the Global Economic Outlook.
The new outlook will update the previous outlook shared in January, including “mutual” tariffs, but exclude subsequent developments such as a 90-day suspension at a higher rate and smartphone exemptions, based on data available as of April 4th.
According to its new forecast, the IMF currently has a US growth outlook of 1.8% in 2025, down 0.9 percentage points from its January forecast.
The US has not yet called for a recession, but chief economist Pierre Olivier Goulinchas told reporters Tuesday that the IMF considers the odds of the recession to be 40% from 25% in October 2024.
The IMF also reduced its global growth forecast for 2025 to 2.8%, down 0.5 percentage points from previous estimates.
“The announcement of Rose Garden on April 2 forced us to abandon our predictions – it’s almost finished at that point – compressing a production cycle that normally takes more than two months.”
“The general denominator… tariffs are a negative supply shock for the economy to impose on them,” he said.
Higher inflation forecasts for advanced economies
The IMF also revised its expectations for headline inflation in developed economies, including the US, UK and Canada, to 2.5% in 2025, reflecting an increase of 0.4 percentage points from its January forecast.
In addition, the US inflation outlook has risen by 1 percentage point since January, estimated above the 2% range.
“For the US, this reflects the stubborn price dynamics in the services sector and the recent rise in price growth for core commodities (excluding food and energy) and the recent rise in supply shocks from recent tariffs,” the IMF said in its April report.
Increases inflation rates in major economies were offset by downward revisions across certain emerging markets and developing countries.
According to the IMF report, the central bank’s efforts to lower inflation are subject to a taxation “as to whether tariffs are perceived as temporary or permanent.”
Previous seizures of market volatility led to strengthening the US dollar compared to other countries, causing upward inflationary pressures in other countries. However, amid recent market divestment, the dollar reversed this trend.
“The impact of tariffs on exchange rates is not easy,” Grunchas said. “In the medium term, the dollar could effectively depreciate if tariffs are converted to a decline in productivity in the US trading sector compared to trading partners.”
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