The International Monetary Fund today announced sharply-lowered world growth forecasts for this year and 2026 and warned the outlook could deteriorate further in an escalating trade war sparked by President Trump’s century-high tariffs impacting all countries.
The global economy is predicted to grow 2.8% this year, down from a previous forecast of 3.3%, and by 3% in 2026. Despite the slowdown, global growth remains above recession levels, though GDP expansion would be at its lowest since the Covid-19 pandemic in 2020.
Noteworthy is the fact that the United States has been given the biggest downgrade among the industrialized states due to the uncertainty caused by the trade conflict. U.S. GDP growth is now anticipated to languish at 1.8% this year – versus a January estimate of 2.7%.
Both targeted by a series of Trump tariffs, Canada and Mexico also saw their growth forecasts shaved. The IMF forecast Canada’s economy would grow by 1.4% in 2025 and 1.6% in 2026. This compares to 2% growth projected for both years in January.
The IMF sees Mexico being hard hit by tariffs, with its growth dipping to a negative 0.3% in 2025, a sharp 1.7 percentage point drop from the January forecast.
For the Euro Area, growth would slow to 0.8% in 2025 and 1.2% in 2026 – forecasts about 0.2 percentage points down from January.
China’s growth forecast has been reduced to 4% for 2025 and 2026, representing downward revisions of 0.6 percentage point and 0.5 percentage point from the January forecast.
In introducing its forecasts, the IMF commented: “The global economic system under which most countries have operated for the last 80 years is being reset, ushering the world into a new era. Existing rules are challenged while new ones are yet to emerge. Since late January, a flurry of tariff announcements by the United States, which started with Canada, China, Mexico and critical sectors, culminated with near universal levies on April 2. The US effective tariff rate surged past levels reached during the Great Depression while counter-responses from major trading partners significantly pushed up the global rate.
“The resulting epistemic uncertainty and policy unpredictability is a major driver of the economic outlook. If sustained, this abrupt increase in tariffs and attendant uncertainty will significantly slow global growth. Reflecting the complexity and fluidity of the moment, our report presents a range of forecasts for the global economy.”
(Image from Dreamstime)