WASHINGTON, April 22, 2025 – The International Monetary Fund (IMF) has warned that a wave of new tariffs and rising policy uncertainty are threatening global economic stability and dragging down growth prospects worldwide.
In its latest World Economic Outlook, unveiled at a press briefing at the IMF Headquarters in Washington, IMF Chief Economist Pierre-Olivier Gourinchas said the global economy is entering a new and more volatile era. The shift follows a rapid escalation in trade tensions, particularly involving the United States and its major trading partners.
“Since late January, many tariff announcements have been made, culminating on April 2nd with near-universal levies from the United States and counter-responses from some trading partners,” Gourinchas said. “The U.S. effective tariff rate has surged past levels reached more than 100 years ago, while tariff rates on the U.S. have also increased.”
The IMF forecasts global growth to reach 2.8% in 2025 and 3.0% in 2026—down a cumulative 0.8 percentage points from its January projections. The report’s baseline scenario incorporates trade policy decisions made through April 4. Without the recent tariff actions, global growth would have been only modestly lower at 3.2%, the IMF noted.
Global trade is expected to be one of the hardest-hit areas. The IMF projects trade growth to slow sharply from 3.8% last year to just 1.7% this year. “These developments are not just affecting trade volumes but are creating widespread uncertainty, which is weighing on investment, supply chains, and productivity,” Gourinchas added.
The economic impact is widespread, but the United States and China are among the most affected. U.S. growth is now projected at 1.8%, a 0.9 percentage point drop, with 0.4 points of that decline attributed directly to the tariffs. Inflation in the U.S. is expected to rise in the near term as a result of increased import costs.
China’s economy is also slowing under the pressure of weakened external demand. The IMF has revised China’s growth forecast down to 4% for 2025, while inflation is expected to drop by 0.8 percentage points, raising concerns about deepening deflationary pressures.
The IMF emphasized that the uncertainty surrounding trade policy is already prompting businesses to delay investment and reassess risk exposure, similar to the disruptions seen during the COVID-19 pandemic. Gourinchas noted that this unpredictability is complicating currency movements and could exert pressure on the U.S. dollar, depending on market sentiment and global demand for dollar assets.
Risks to the global economy have tilted firmly to the downside. The IMF now places the probability of a global downturn this year at 30%, nearly double the 17% estimate given in October. A further escalation of trade tensions or a tightening of financial conditions could worsen the outlook significantly.
Still, the IMF believes that growth could rebound quickly if countries step back from aggressive trade measures and prioritize a clear, stable, and rules-based trading environment.
In its policy recommendations, the IMF called for restored trade stability, agile monetary policy, and disciplined fiscal management. Gourinchas urged governments to focus new spending where needed, but cautioned against long-term commitments without proper fiscal planning.
“Even if some of the grievances against our trading system have merit,” he said, “we should all work towards fixing the system so that it can deliver better opportunities to all.” Gourinchas pointed out.
The report underscores the growing fragility of the global economy and the need for cooperation to navigate an increasingly uncertain world.
