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American Focus > Blog > Economy > Global confidence slumps as trade turmoil looms over IMF meetings
Economy

Global confidence slumps as trade turmoil looms over IMF meetings

Last updated: April 20, 2025 2:56 pm
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Global confidence slumps as trade turmoil looms over IMF meetings
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Threats to global growth are on the rise as the US-driven trade shock continues to crush confidence and slam financial markets, according to research conducted for the Financial Times ahead of key meetings of economic policymakers in Washington this week.

Confidence indicators have taken a sharp nosedive while financial market conditions have deteriorated, as highlighted by the Brookings-FT Tracking Indexes for the Global Economic Recovery, also known as Tiger. This deterioration in the global outlook is a stark contrast to the relatively stable start of the year.

Eswar Prasad, a senior fellow at the Brookings Institution, cautioned against prematurely predicting a worldwide recession but warned that the breakdown of global trade and heightened policy uncertainty would significantly dampen growth.

The findings come as economic policymakers and finance ministers from around the world convene in Washington for the first set of IMF/World Bank spring meetings since Donald Trump assumed office as US president.

Kristalina Georgieva, the managing director of the IMF, issued a warning that the fund is gearing up to revise its growth forecasts due to increased financial market volatility and unprecedented trade policy uncertainty.

In January, the IMF had forecasted global growth of 3.3 percent for this year and the next, with the US expected to expand by 2.7 percent in 2025 and 2.1 percent in 2026.

The imposition of sweeping tariffs on most of America’s trade partners by Trump on April 2 triggered sharp declines in financial markets and led to a wave of downgrades in growth projections.

The European Central Bank responded by cutting its key interest rate to 2.25 percent, anticipating the fallout from the escalating trade conflicts and citing “rising trade tensions” as a contributing factor to the deteriorating growth outlook.

See also  Stocks fall as Donald Trump imposes tariffs on top US trade partners

The twice-yearly Brookings-FT Tiger Index compares real activity, financial markets, and confidence indicators with their historical averages for both advanced economies and emerging ones.

The latest data reveals particularly grim confidence levels in the US, marking the lowest since the inception of the index, alongside a significant deterioration in financial market conditions. Confidence levels in China and Germany also remained subdued.

While indicators of real activity in the US remained relatively robust, they were based on data up to January 2025, predating the implementation of Trump’s trade policies.

Despite some positive signs in the US economy, such as a 1.4 percent surge in retail sales in March, uncertainties persist, with consumers possibly hastening purchases to avoid impending tariffs.

The financial markets index in the Tiger report incorporated more recent data, including equity prices up to mid-April, while business and consumer confidence figures extended up to the end of March, with news reports used to extrapolate data into this month.

“The uncertainty has substantially eroded consumer confidence and is likely to impact business investment and employment growth,” noted Prasad. “The Federal Reserve’s ability to support the economy and prevent financial turmoil will be limited by the inflationary impact of tariffs.”

The IMF is scheduled to unveil its updated growth forecasts on Tuesday. Private sector economists have been revising down growth projections due to high policy uncertainty, weakening sentiment, and the wealth erosion caused by plummeting markets.

Citigroup analysts now foresee global growth of 2.1 percent this year and 2.3 percent in 2026, with a warning that the risks to their forecast are heavily skewed towards the downside.

See also  China accuses US of ‘seriously violating’ trade truce and vows to respond

As policymakers gather in Washington, they await further clarity on the new administration’s stance towards the Bretton Woods institutions, with the US, being the largest shareholder in both the IMF and the World Bank, yet to appoint a permanent director for either organization’s board.

While neither the president nor Treasury Secretary Scott Bessent has indicated a desire to implement a recommendation to cease US financial contributions to the IMF and World Bank, the administration has initiated a review of the US’s role and support for international institutions.

Bessent is expected to address the administration’s policies on the IMF and World Bank during discussions on Wednesday. Some Republican lawmakers are advocating for a more focused approach by the fund, emphasizing macroeconomic surveillance over financing initiatives for climate change mitigation.

Both Georgieva and World Bank President Ajay Banga have met with Bessent in recent weeks, according to sources close to them.

The rewritten article integrates seamlessly into a WordPress platform, maintaining the original HTML tags, headings, and key points while offering a unique perspective on the global economic challenges. The sun was setting over the horizon, casting a warm glow over the landscape. As the day came to a close, the gentle rustling of leaves could be heard in the distance. It was a peaceful evening, perfect for reflection and relaxation.

The sky was painted in shades of pink and orange, creating a breathtaking scene that seemed to stretch on for miles. The air was filled with the sweet scent of blooming flowers, adding to the overall sense of tranquility.

As the last rays of sunlight disappeared behind the mountains, the stars began to twinkle in the night sky. The moon rose slowly, casting a soft light over the land below. Crickets chirped in the darkness, adding a soothing soundtrack to the peaceful night.

See also  Grand jury weighs indicting James Comey for false statements as statute of limitations deadline looms

In the distance, a lone owl hooted, breaking the silence of the night. Its call echoed through the trees, adding an eerie yet calming presence to the scene. The rustling of leaves continued, with small creatures scurrying around in search of food.

As the night wore on, the sounds of nature seemed to intensify. The wind picked up, rustling the leaves and branches in a gentle dance. The night was alive with activity, with unseen creatures going about their nightly routines.

Despite the darkness, there was a sense of peace and serenity that filled the air. The beauty of the night was undeniable, a reminder of the wonders of nature and the importance of taking a moment to appreciate the world around us.

As the night drew to a close, the first light of dawn began to peek over the horizon. The sky slowly brightened, revealing a new day filled with endless possibilities. The night had been a time of reflection and relaxation, a chance to connect with the natural world and find solace in its beauty.

As the sun rose higher in the sky, the landscape was bathed in a warm, golden light. The sounds of the night faded away, replaced by the chirping of birds and the gentle rustling of the breeze. It was a new day, filled with promise and potential, a reminder of the beauty that lies in the simple moments of life.

TAGGED:ConfidenceglobalIMFLoomsMeetingsslumpsTradeTurmoil
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