The International Monetary Fund (IMF) has sharply lowered its forecast for global economic growth in 2025, citing mounting risks to financial stability and escalating trade tensions spurred by new U.S. tariff measures under President Donald Trump.
In its latest World Economic Outlook (WEO) released Tuesday, the Fund now expects the global economy to expand by 2.8% this year a 0.5 percentage point drop from its previous estimate in January. Growth is projected to recover modestly to 3.0% in 2026, also trimmed by 0.3 points.
“We are entering a new era the global economic architecture of the past 80 years is being reshaped,” said IMF Chief Economist Pierre-Olivier Gourinchas at a press briefing in Washington, as global financial leaders gathered for the IMF and World Bank Spring Meetings. “If these trade tensions persist, they will weigh heavily on global growth.”
The WEO incorporates tariff actions up to April 4, excluding the latest U.S. moves that pushed cumulative tariffs on Chinese goods as high as 145%. The IMF noted that if these measures remain in place and are expanded, the drag on global growth could be significantly worse.
Tariff Tensions Rattle Financial Markets
In a separate Global Financial Stability Report, also published Tuesday, the IMF highlighted rising vulnerabilities in global markets, fueled by tighter financial conditions and heightened economic policy uncertainty.
“Risks to financial stability have increased meaningfully,” the report warned, adding that the unpredictable rollout of U.S. tariffs has added volatility to already fragile markets.
U.S. Growth Slashed, Inflation Set to Rise
The economic outlook for the U.S., the world’s largest economy, was revised down dramatically. The IMF now expects U.S. growth to hit just 1.8% in 2025, a sharp 0.9 percentage point drop from January’s forecast and to cool further to 1.7% by 2026.
The slowdown, the Fund said, is being driven by “policy uncertainty, ongoing trade disputes, and fading domestic momentum.”
Meanwhile, U.S. inflation is expected to rise to 3.0% this year before easing slightly to 2.5% in 2026. The broader effect of tariffs is also expected to nudge up global inflation, with the IMF raising its forecast for world consumer prices to 4.3% in 2025 and 3.6% the following year.
Top Trade Partners and Global Regions Hit
The Trump administration’s trade policy has sent shockwaves through major U.S. trading partners, with China expected to bear the brunt. Chinese growth is projected to fall to 4.0% in 2025, down from 5.0% in 2024 despite increased fiscal stimulus efforts by Beijing.
Other major economies are also feeling the pinch:
Mexico is now forecast to contract by 0.3%, slashed 1.7 points from January.
Canada’s growth outlook was significantly reduced (exact figure not disclosed).
Japan is projected to grow just 0.6% in both 2025 and 2026.
In Europe, the growth outlook for the eurozone has been lowered to 0.8% this year and 1.2% in 2026. Germany, the region’s largest economy, is now forecast to record zero growth in 2025. France, the UK, and Italy also saw cuts to their growth expectations.
One exception in Europe is Spain, which received an upward revision and is now expected to grow by 2.5% this year.
Outlook for Africa, Middle East, and Beyond
The IMF also downgraded expectations for the Middle East, citing ongoing conflict and disruptions to oil and shipping. However, growth in the region is expected to recover from 2024 onward as stability gradually improves.
In sub-Saharan Africa, economic activity is projected to dip slightly to 3.8% this year, with a stronger rebound anticipated in 2026.
