Tariffs have raised major headwinds on the US and the global economy, leading the International Monetary Fund to cut its 2025 growth forecast.
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.
This is part of the “reference forecast” of the fund’s global economic growth and inflation based on data available on April 4, including US “mutual” tariffs, but excludes subsequent developments such as a 90-day suspension on smartphones and updates the previous outlook shared in January.
“This in itself is a major negative impact on growth,” the IMF said in its April 2025 executive summary of the Global Economic Outlook.
In addition to trade policy pressure, IMF chief economist Pierre-Olivier Gourinchas added that weakening consumer reliability and consumption metrics is also taking downward revisions into consideration.
Gourinchas told reporters on Tuesday that the IMF has risen by 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 forecasts – it’s almost finished at that point – compressing a production cycle that normally takes more than two months to less than 10 days,” Gourinchas wrote in an April report.
“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.
The US inflation outlook was also revised to 3%, up 1% from its initial forecast in January.
“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 an 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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