The International Monetary Fund now predicts that global economic growth will experience a “significant slowdown” in 2025 as President Trump attempts to reshape global trade with tariffs.
The IMF expects US growth to drop nearly a full percentage point lower than pre-tariff estimates, to 1.8%, due to greater policy uncertainty, trade tensions, and lower consumer spending expectations. And the odds of a US recession have risen to 40%, IMF chief economist Pierre-Olivier Gourinchas said Tuesday.
Tariffs are also expected to weigh on US growth in 2026, which is now projected to be 1.7%.
Globally, the IMF estimates that a half percentage point will be shaved off economic growth as trade slows, falling to 2.8% from a prior estimate of 3.3%, before recovering to 3% in 2026. The chances of a global recession are now 30%, according to Gourinchas.
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The IMF, in its new World Economic Outlook released Tuesday, called Trump’s April 2 “reciprocal” tariffs announcement “a major negative shock,” noting that “the global economy is at a critical juncture” and that “tariffs and uncertainty will lead to a significant slowdown in global growth in the near term.”
Trump has paused many of those reciprocal tariffs for 90 days while his administration tries to strike deals with the countries affected, but other tariffs imposed earlier remain in effect.
“Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near- and long-term growth, while eroded policy buffers weaken resilience to future shocks,” the IMF warned in its report.
The IMF also expects inflation to rise to 4% in the US as a result of tariffs. It expects prices to rise in other developed economies too, even as worldwide inflation drops.
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And it warned that where inflation risks are higher or inflation expectations are rising, central banks should base any future interest rate cuts on evidence that inflation is heading decisively back down to ensure that inflation expectations remain anchored.
The idea is to guard against the risk of prematurely cutting rates, only to follow later with rate hikes.
“Central banks need to be particularly vigilant regarding those risks after the recent period of prolonged inflation and should be ready to act forcefully,” according to the IMF report, “because inflation expectations may be much less stable in instances of renewed inflationary pressures.”
