IMF lowered growth expectations for most countries along Trump’s duties

The International Monetary Fund has lowered its growth forecasts in the United States, China and most countries, citing US tariffs, which are now at 100 years, and warning that further commercial tension will slow down growth.

The IMF publishes an update to its world economy forecasts, composed just 10 days after US President Donald Trump has announced universal duties for almost all trading partners and higher rates – currently suspended – for many countries. It reduced its global growth prognosis by 0.5 percentage points to 2.8% in 2025 and by 0.3 percentage points to 3% of its prognosis from January that growth will reach 3.3% in the two years.

It says inflation is expected to fall more slowly than expected in January, given the impact of duties, reaching 4.3% in 2025 and 3.6% in 2026, with « remarkable » upwards for the US and other developed economies.

The IMF called the « Reference Forecast » report, based on development until April 4, citing the extreme complexity and smoothness of the present moment. « We are entering a new era, as the global economic system that has been operating in the last 80 years is being reconciled, » IMF chief economist Pierre-Olivier Gurinha told reporters.

The IMF said that the rapid escalation of commercial tensions and the « extremely high levels » of uncertainty about future policies will have a significant impact on world economic activity. « It’s quite significant and affects all regions around the world. We see lower US growth, lower euro area growth, lower growth in China, lower growth in other parts of the world, » Gurinha said in an interview with Reuters.

« If we receive escalation of trade tensions between the US and other countries, it will nourish additional uncertainty, it will create additional instability in the financial market, it will tighten the financial conditions, » he said, adding that the combined effect will further reduce the prospects for global growth.

The weaker growth prospects have already reduced the demand for the dollar, but the correction of the currency markets and the rebalancing of the portfolio observed so far are correct, he said. « We do not see a bump or escape to the exits, » Gurinsha said. At this stage we are not concerned about the stability of the international currency system. Something much greater than that will be needed. « 

However, the medium -term growth prospects remain mediocre, with the five -year forecast lingering at 3.2%, below the historical average of 3.7% for the period 2000 – 2019, with no relief in the absence of significant structural reforms.

The IMF has reduced its prognosis for world trade at 1.5 percentage points to 1.7%, half of the growth observed in 2024, reflecting the accelerating fragmentation of the global economy.

Trade will continue, but it will cost more and be less effective, he said, citing confusion and uncertainty about where to invest, where to deliver products and where to buy components. « The restoration of predictability and clarity of the trading system in any form is absolutely critical, » he said.

US growth down, inflation – up

The IMF reduced its US growth prognosis by 0.9 percentage points to 1.8% in 2025 – a complete percentage point of less than 2.8% growth in 2024 – and by 0.4 percentage points to 1.7% in 2026, citing political uncertainty and commercial tension.

Gurinha told reporters that the IMF did not predict a recession in the United States, but the chances of a decline increased from about 25% to 37%. He said the IMF now predicted major inflation in the United States to reach 3% in 2025, one percentage point higher than the forecast in January due to tariffs and the main force in services.

This meant that the Federal Reserve would have to be very alert to maintaining stable inflation expectations, Gurinha said, noting that many Americans were still marked by the inflation jump during the Covid pandemic.

Asked about the impact of all the moves of the White House to eliminate Fed President Jerome Powell, Gurinha said it was « vital » that central banks can remain independent to maintain their confidence in dealing with inflation.

US stocks suffered great losses on Monday after US president intensified his attacks on Powell, nourishing fears about the independence of the central bank.

U.S. Canada and Mexico neighbors, both covered by a number of Trump myths, also saw a decrease in growth predictions. The IMF estimated the Canada economy to increase by 1.4% in 2025 and 1.6% in 2026, instead of 2% growth predicted in the two years in January.

He predicts that Mexico will be heavily affected by duties, with its growth declining to a negative 0.3% in 2025, a sharp decrease of 1.7 percentage points over the January forecast before recovering to 1.4% in 2026.

Lower growth in Europe and Asia

The IMF estimates to slow down the growth in the euro area to 0.8% in 2025 and 1.2% in 2026, with both forecasts being about 0.2 percentage points down compared to January. It says that Spain is outside it with a growth prognosis of 2.5% in 2025, adjusting upwards of the 0.2 percentage point forecast, reflecting strong data.

Compensating forces include stronger consumption due to increasing salaries and the planned fiscal relief in Germany after major changes in its « debt brake ». IMF reduced its growth prognosis for Germany by 0.3 percentage points to 0.0% in 2025 and by 0.2 percentage points to 0.9% in 2026.

Growth in the UK will reach 1.1% in 2025, by 0.5 percentage points under the January forecast, raising to 1.4% in 2026, reflecting the impact of recent duties, higher gold yields and less private consumption.

Trade tensions and tariffs were expected to reduce Japan’s economic activity by 0.5 percentage points in 2025 compared to January forecast, with growth expected to be 0.6%.

China’s growth prognosis was reduced to 4% in 2025 and 2026, reflecting respectively from 0.6 percentage points and 0.5 percentage points of January forecast.

Gurinha said the impact of duties on China – highly dependent on exports – was about 1.3 percentage points in 2025, but this was offset by stricter fiscal measures.