President Trump’s trade war could deliver a significant blow to the global economy, with the U.S. being hit particularly hard, according to the latest outlook from the International Monetary Fund.
In its new World Economic Outlook, published Tuesday, the IMF slashed its growth projection for the U.S. to 1.8% in 2025, down a full percentage point from the 2.8% rate in its January estimate. At the same time, the IMF raised its estimate for U.S. inflation in 2025 to 3.0%, up from 1.9% estimate in October.
At the global level, growth is projected to slow from 3.3% last year to 2.8% this year.
The IMF said Trump’s trade war has everything to do with the gloomier economic picture. “The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity,” the group said, adding that the risks to the global economy are “firmly tilted to the downside.”
Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters Tuesday that there is no reason to think tariffs will boost growth in later years, as the White House has suggested they would. “The long-term impact of the tariffs, if they are maintained, [will be] negative for all regions, just like the short-term impacts,” he said.
Among its prescriptions for change, which include goals for monetary policy and fiscal spending, the IMF called for nations of the world to “bring back stability and find mutually beneficial trade arrangements.” Noting that “businesses need predictability going forward,” the IMF said “the global economy needs a well-functioning rules-based trading system.”