IMF Warns Trump’s New Tariff Wave Slows Global Growth

The IMF warned that Trump’s latest tariff hikes surpass levels seen during the Great Depression. This shift signals the end of the post–World War II era of open trade. The global economy now faces a structural reset with long-lasting consequences.

Sharp downgrade in global growth forecasts

The IMF cut global growth forecasts to 2.8% for 2025 and 3% for 2026, down from previous projections. This revision marks a sharper slowdown than the correction following Russia’s invasion of Ukraine, according to IMF analysts. Advanced and emerging economies now face a broad deceleration, reflecting tighter financial conditions and weakening global demand. Global policymakers prepare for economic turbulence as uncertainty deepens across trade, inflation, and geopolitical tensions.

Mexico and the U.S. among the hardest hit

Analysts now expect Mexico’s economy to shrink 0.3% in 2025, reversing the earlier projection of 1.4% growth. Forecasters lowered the U.S. growth outlook to 1.8% in 2025 and slightly down to 1.7% for 2026.
Despite a resilient labor market, economists raise concerns about rising recession risks in the U.S. economy. These revisions highlight global financial tightening and weaker external demand dragging North American economies into slower growth.

China and Europe face moderate effects

The IMF lowered China’s growth forecast to 4% for 2025. The eurozone’s estimate dropped to 0.8%, showing the bloc’s vulnerability to global trade tensions. Chinese retaliatory measures, although selective, will also contribute to the global slowdown.

Equities and Treasuries Tumble Amid Widespread Pullback From US Holdings Markets Recap

Equities and treasuries tumble on Monday, Wall Street experienced a sharp downturn…

Domestic manufacturing: benefit or illusion?

The Trump administration argues that tariffs will revitalize domestic industry. However, the IMF warns that automation—not globalization—is the primary driver of job losses in manufacturing. Shielded industries may face less competition and fewer incentives to innovate.

Inflation risk and the need for monetary independence

U.S. inflation is expected to be one percentage point higher than previously forecast. The Federal Reserve faces political pressure to cut interest rates, but the IMF stresses the importance of central bank independence to preserve monetary policy credibility.

Financial uncertainty and dollar dominance at stake

The IMF warned that further tariff increases could intensify financial market volatility. The dollar’s global dominance may erode in this evolving monetary landscape. A sudden reconfiguration of the international financial system cannot be ruled out.