No, the global economy isn't falling apart

Despite warnings of a meltdown, Trump's policies have barely dented global growth forecasts

- TT RAM MOHAN

Since April 2 — the day President Donald Trump declared as "Liberation Day" — we have been told that the world economy is headed for a massive setback and markets for a meltdown.

Mr. Trump announced reciprocal tariffs on some 180 countries and territories. On April 9, he declared a 90-day pause on these tariffs for all countries except China. Since then, he has raised tariffs on Chinese imports to 145 percent. The Chinese have retaliated with a 125 percent tariff on imports from the US.

President Trump is confident that tariffs with all countries, including China, will be suitably negotiated. But nobody knows by what date and at what levels the tariffs will settle. In early April, experts warned that prolonged uncertainty caused by Mr. Trump's tariff war would result in economic chaos.

A month on, the picture is nowhere near as grim as experts made it out to be. The International Monetary Fund (IMF) sees global economic growth slowing from 3.3 percent last year to 2.8 percent this year — a deceleration of 0.5 percentage points. The US economy is expected to slow from 2.8 percent in 2024 to 1.8 percent in 2025. That seems sharp, except that US growth in recent years has been powered by heavy government borrowings. The long-term trend growth rate for the US is 2 percent; 1.8 percent is not very far from the trend.

China is projected to slow down from 5 percent to 4 percent, which is better than the 3 percent many commentators had predicted even without the Trump tariffs. The Indian economy will grow at 6.2 percent instead of 6.5 percent. So, yes, the Trump tariffs will adversely impact growth worldwide. However, the IMF projections hardly point to an economic collapse.