The International Monetary Fund (IMF) has a dire prediction to present. According to the latest calculations from the IMF, recent tariff hikes by the United States may already be enough to halve global economic growth. The US government has introduced a 10% tax on goods from the vast majority of other countries while pausing much higher rates for dozens of nations for a period of 90 days. The IMF notes that these changes, in addition to increased tariff rates, point to a likely “serious slowdown” in global growth.
The US and China continue to operate under very high overall effective tariff rates. This outcome means a more unpredictable trading environment. The US has imposed tariffs as high as 145% on these Chinese goods, with many other goods facing similarly massive tariffs. In retaliation, China struck back with its own tariffs, going as high as 125% on U.S. goods. Further escalation through this trade conflict is highly damaging. It holds a dagger above the rest of the world’s trade, more so given the connectedness of today’s supply chains. It’s not like the IMF didn’t flag these challenges. It noted that uncertainty about trade policies was a “significant factor” behind its last three downward revisions to global growth.
The IMF’s rosy projections were already markedly tempered by the failure of the recent truce in rising tariffs to avert long-term economic fallout. This evaluation is against their baseline forecast as of April 4. The IMF just downgraded prospects for global economic growth to a lowly 2.8% this year. This represents a major reduction from the last projection of 3.3%.
Looking forward, the IMF predicts that tariffs will keep pushing down growth even farther out into 2026. And at Goldman, they’ve reduced their chances of a recession in the United States this year to 40%. That’s quite a jump from their original estimate of 25% last October. This increase represents another example of how trade tensions are affecting the stability of our economy.
In fact, the IMF projected the United Kingdom to grow by 1.4% next year. This expansion continues despite the bad-guy-Benny-tariff-tariff-tariff cloud hanging over the industry. They project the UK’s growth in 2025 to be around 1%. This prediction tracks very closely with the government’s own Office for Budget Responsibility (OBR) estimates. This alignment gives cause for cautious optimism about the strength of the UK’s foundations in the face of a shifting global picture.
The IMF’s report serves as a critical reminder of how interconnected global economies are and the potential ramifications of protectionist policies. Tariffs play a huge role in one country’s bilateral trade relationship with another. They are perhaps most immediately felt by businesses and consumers as they send shockwaves through global markets.