IMF releases grim forecast for U.S. economy
In this DML Report…
The International Monetary Fund (IMF) cut its 2025 U.S. economic growth forecast to 1.8%, down 0.9 percentage points from its January projection of 2.7%, citing trade tensions and policy uncertainty under President Donald Trump’s administration. The IMF also lowered its 2026 U.S. growth forecast by 0.4 percentage points to 1.7%. The downgrade follows Trump’s implementation of widespread tariffs, announced on April 2, which raised effective U.S. tariff rates to levels unseen in a century, prompting retaliatory measures from trading partners and weakening demand momentum. The IMF report highlighted that these tariffs have increased inflation expectations and economic uncertainty in the U.S.
Globally, the IMF reduced its growth forecast to 2.8% for 2025 and 3% for 2026, down from 3.3% projected in January, due to the ripple effects of U.S. tariffs and trade policy uncertainty. The euro area’s growth is now expected at 0.8%, a 0.2 percentage point reduction, while emerging markets and developing economies face a slowdown to 3.7% in 2025 and 3.9% in 2026. China’s growth was cut to 4% for both years, a downward revision of 0.6 and 0.5 percentage points, reflecting its vulnerability to tariffs. The IMF noted that trade tensions, long simmering, have now boiled over, eroding trust in the international system.
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The IMF’s report also raised its U.S. inflation forecast, pointing to the tariffs as a contributing factor, though specific figures were not provided. IMF Chief Economist Pierre-Olivier Gourinchas addressed the findings during the IMF/World Bank Group Spring Meetings in Washington on April 22. The report aligns with broader concerns about global economic slowdown, as posts on X indicate public sentiment reflecting fears of a U.S. recession amid high federal debt and tariff impacts. No specific countermeasures or policy responses from the U.S. government were detailed in the report.