The International Monetary Fund (IMF) on Tuesday reduced its global growth forecast, attributing the downgrade to President Donald Trump’s tariff policies marking a “new era” for the world economy. The IMF sharply lowered its growth forecast to 2.8% for this year, 0.5 percentage points below its January outlook. According to Bloomberg, this marks the slowest expansion since 2020 and the second-worst forecast since 2009.
The IMF anticipates global growth to reach 3% in 2026, 0.3 percentage points lower than its previous forecast. The group cited the significant trade overhaul Trump is attempting through widespread tariffs on all U.S. trade. The White House argues these duties will encourage nations to renegotiate trade deals with the U.S.
However, these tariffs have also sparked considerable recession fears and concerns about inflation. While the IMF remains hopeful that a global recession can be avoided, it sees the U.S. as one of the hardest-hit economies due to Trump’s trade policies.
The U.S. economic outlook was revised downward more than any other advanced economy. The IMF projects U.S. growth at 1.8% this year and 1.7% next year, compared to the 2.8% expansion in 2024.
The downward revision is attributed to greater policy uncertainty, trade tensions, and a softer demand outlook due to slower-than-expected consumption growth.
The IMF warned that while circumstances could improve if trade stances soften, worsening tensions could further weigh on growth. Financial conditions could tighten as markets react negatively to diminished growth prospects and increased uncertainty. Although banks remain well-capitalized overall, financial markets may face more severe tests.
— new from Business Insider