New Delhi: The International Monetary Fund (IMF) has warned that the global economic growth is expected to slow down in the upcoming months due to the trade war initiated by US President Donald Trump’s extensive tariffs on nearly all trading partners. The IMF’s latest World Economic Outlook downgraded its outlook for all G7 nations, as well as major economies like China, India, Brazil, and South Africa, raising the risk of recession for the US.
The IMF cautioned that failure to resolve trade tensions urgently could further harm growth prospects. The abrupt increase in tariffs and the resulting uncertainty are likely to significantly impede global growth if sustained.
Global finance chiefs have been meeting in Washington to negotiate deals with Trump’s team in an attempt to reduce levies. Trump expressed optimism about reaching a trade deal with China that could lead to a substantial reduction in tariffs, which boosted market sentiment.
According to the IMF’s projections, incorporating some but not all tariff measures introduced this year, global economic growth is expected to reach 2.8% this year, down by 0.5 percentage points from the previous forecast in January. The forecast for next year is 3.0%, a decrease of 0.3 percentage points from January.
IMF chief economist Pierre-Olivier Gourinchas stated that the global economic system is entering a new era, with increasing trade tensions and uncertainty slowing down global growth. The IMF expects tariffs to cause a rise in global prices, with consumer prices projected to increase to 4.3% in 2025 and 3.6% in 2026.
Trump’s sporadic tariff implementation has heightened risks to financial stability, according to the IMF’s Global Financial Stability Report. The report highlighted that tighter global financial conditions and heightened economic uncertainty have significantly increased global financial stability risks.
The IMF predicts that top US trading partners such as Mexico, Canada, and China will be negatively affected by the tariffs. China’s growth is expected to decline to 4.0% this year, while Mexico’s economy is projected to contract by 0.3%. Canada’s growth outlook has also been revised downward, and Japan is expected to see minimal growth in the coming years.
The IMF has also downgraded the growth outlook for European countries, with the euro area’s growth forecast reduced to 0.8% in 2025. The Middle East and sub-Saharan Africa are also expected to face challenges, although India’s growth outlook remains relatively stable at 6.2%, supported by private consumption in rural areas.
Overall, the IMF’s report underscores the potential impact of escalating trade tensions on global economic growth and financial stability.
