IMF slashes global growth forecasts as Trump tariffs spark trade war

The International Monetary Fund (IMF) sharply lowered its forecasts for world growth for 2025 and 2026, warning the outlook could deteriorate further as US President Donald Trump's tariffs spark a global trade war.

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WASHINGTON - The International Monetary Fund (IMF) sharply lowered its forecasts for world growth for 2025 and 2026, warning the outlook could deteriorate further as US President Donald Trump's tariffs spark a global trade war.

The downgrades add weight to similar warnings from several Wall Street banks in recent weeks, with JPMorgan and Goldman Sachs saying the chances of a recession in the US have spiked.

The IMF cut its projection for global output growth in 2025 to 2.8 per cent in its updated World Economic Outlook released on April 22. That was lower than its January forecast of 3.3 per cent and would be the slowest expansion of gross domestic product since the Covid-19 pandemic in 2020.

It would also be the second-worst figure since 2009.

The fund reduced its estimate for 2026 to 3 per cent, a drop of 0.3 percentage point.

For the US, the trade war will stoke a supply shock that drives up prices and weighs on productivity.

For trading partners, the higher duties will translate as a demand shock that hits output and prices.

Effective tariff rates in the US have jumped to levels not seen in a century, the IMF said.

"We are entering a new era," IMF chief economist Pierre-Olivier Gourinchas said in a briefing with reporters. "The global economic system that has operated for the last 80 years is being reset."