The US President Donald Trump and the uncertainty they create are likely to slow down according to the tariffs of US President Donald Trump, the International Monetary Fund said on Tuesday.
The IMF said that the global economy will only grow by 2.8 percent this year, according to its forecast in January of 3.3 percent, according to the latest global economic outlets. In 2026 the global growth will be 3.0 percent, the fund also predicts under its previous estimate of 3.3 percent.
The fund also sees the two largest economies in the world, China and the United States, weaker: The economic growth of the United States will be only 1.8 percent this year, which is significantly due to its earlier forecast of 2.7 percent and a full percentage point under its exposure around 2024.
The IMF does not expect a US recession, although this year it has increased its probability of 25 percent to around 40 percent. China is now expected to be expanded by four percent in this and next year in order to attribute half a point to previous forecasts.
“We are entering a new era,” said Pierre-Olivier Gourinchas, chief economist at the IMF. “This global economic system that has been operated in the past 80 years is reset.”
The forecasts underline the widespread effects of both the tariffs and the uncertainty they have created. Every country in the world is affected, the IMF said the highest in a century by hiking in US import taxes, which have now lifted the average US obligations to around 25 percent.
The forecasts largely agree with the expectations of private economists, although some fear that a recession is increasingly likely. JPMorgan economists say that the chance of a US recession is now 60 percent. The US Federal Reserve has also predicted that growth will weaken to 1.7 percent this year.
The IMF is a credit organization of 191 nations that promotes economic growth and financial stability and reducing global poverty.
Pierre Poilievre said on Tuesday that a conservative government would use revenue from tariffs that the liberals would use for targeted help for directly affected industries and to finance tax cuts.
The United States will probably suffer the supply shock
Gourinchas said that increased uncertainty about import taxes caused the IMF to take the unusual step to prepare various scenarios for future growth. The forecasts were completed on April 4 after the Trump government, together with almost universal 10 percent tasks, had announced comprehensive tariffs in almost 60 countries.
These tasks were carried out on April 9 for 90 days. Gourinchas said the break did not significantly change the forecasts of the IMF, since the United States and China have been imposed on such steep tariffs since then.
The Trump management has done tasks on cars, steel and aluminum as well as 25 percent of import taxes for most goods from Canada and Mexico. The White House also has 10 percent tariffs for almost all imports and a great obligation of 145 percent on goods from China, although the smartphone and computer have been excluded. China has returned to USGoods with 125 percent tasks.
The U.S. -American and global economies will probably also put a great impact on uncertainty in connection with the next steps of the Trump government, the IMF said. Most traded goods are parts that fit into finished products, and the tariffs could interfere with the supply chains, similar to during pandemic, gourinchas warned in a blog post.
“Companies that are confronted with unusual market access will probably take a break at short notice, reduce investments and reduce the expenses,” he wrote.
The US tariffs are also expected to reach less developed nations, with the Mexican economy expected by 0.3 percent this year, which is due to earlier growth of 1.4 percent. South Africa is expected to grow by only 1.0 percent this year, a forecast of 1.5 percent in January.
While the US economy will probably suffer an offer shock, China is expected to have a reduced demand because the US purchases will decrease in its exports.
Inflation will probably deteriorate in the United States and increase to around three percent by the end of this year, while it will hardly be changed in China, the IMF forecast.
Customs to get counting from the Chinese economy
In his blog post, Gourinchas admitted that there was an “acute perception that globalization wrongly drove many domestic manufacturing jobs” and added that “these complaints have some merits”.
But he said that the “deeper strength behind this decline was technological progress and automation, not globalization”.
Gourinchas found that both Germany, which has a commercial surplus, as well as in the United States, which has a deficit, has still brought factory production relatively up to date in recent decades, although automation has established employment.
The IMF assumes that the tariffs will take a large part of China’s economy, but it also predicts that additional expenses from the Chinese government will compensate for a large part of the hit.
The European Union is expected to grow slower, but the hit of tariffs is not that big, partly because it is exposed to lower US obligations than China. In addition, some of the hits from tariffs are compensated for by stronger government spending in Germany.
The economies of the 27 countries that use the euro will be forecast by 0.8 percent this year and 1.2 percent next year, which will only be 0.2 percent in both years after the IMF’s forecast.
Japan’s growth forecast was reduced to 0.6 percent this year and next year, 0.5 percent and 0.2 percent lower than in January.
In a separate report on Tuesday, the IMF warned that “global financial stability risks together with the deteriorating economic prospects have increased significantly. The fund found that some stock and bond prices, despite the latest market trout, remained highly triggered by Trump’s tariffs – which means that they are susceptible to further acceptance.
The IMF also warned that “some financial institutions could be burdened in volatile markets, which in particular on heavily indebted hedge funds and asset management companies and the risk of being forced to collect cash by selling investments in an already external market.
