President Donald Trump’s unpredictable tariff policy and countermeasures by America’s trading partners will likely deal a heavy blow to economies worldwide, with US prosperity hit particularly hard, the International Monetary Fund warned Tuesday. Global economic growth will slow to 2.8% this year, from 3.3% last year and significantly below the historical average, the IMF forecast in its World Economic Outlook report. The slowdown expected in the United States is even steeper, with its economy likely to grow only 1.8% in 2025, compared with a 2.8% expansion in 2024. Both predictions are more pessimistic than the fund’s January projections, which came before Trump’s flurry of tariff announcements took America’s average import tax to its highest level in a century. “The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity,” the Washington, DC-based institution said. And risks to the global economy are “firmly tilted to the downside,” it added. Trump’s new tariffs account for almost half of the sharp downgrade in the IMF’s US growth forecast for this year, Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in a blog post, noting that uncertainty over policy dented demand in the US even before the recent tariff announcements. North America, just like all regions, can’t expect any upside from the tariffs further down the line. “The long-term impact of the tariffs, if they are maintained, (will be) negative for all regions, just like the short-term impacts,” Gourinchas told reporters Tuesday. Gourinchas also said that “central bank independence remains a cornerstone.” The comment comes just a day after Trump attacked US Federal Reserve Chair Jerome Powell as a “major loser,” part of his continuing campaign to pressure the central bank chief to cut interest rates. Lowering borrowing costs at this point would risk pushing up US inflation, which is still running above the Fed’s 2% target and is likely to rise further because of Trump’s tariffs, according to many forecasters. The IMF has grown gloomier on US prices and now sees inflation hitting 3% this year, compared with its January forecast of 2%. The latest World Economic Outlook was put together under “exceptional” circumstances, the IMF said. Trump’s unveiling of sweeping tariffs on April 2 “forced us to jettison our projections — nearly finalized at that point,” it wrote. Similarly, Gourinchas told reporters: “We’re entering a new era as the global economic system that has operated for the last 80 years is being reset.” Underscoring the importance of trade to the economic outlook, the IMF said in its report that a ratcheting up of trade tensions, along with even more questions about where trade policies are headed, could further reduce growth, whereas “de-escalation from current tariff rates and new agreements providing clarity and stability in trade policies” could do the opposite. In an interview, Christine Lagarde, president of the European Central Bank, voiced a similar view of trade. “Free trade has always enhanced the overall growth, has been a serious contributor to the development of all economies,” she told CNBC Tuesday. She said higher tariffs will have a negative impact on Europe’s economic growth, although she doesn’t expect a recession in the 20 countries that use the euro. This story has been updated with additional information. Anna Cooban contributed reporting.
Trump’s trade war will hit US prosperity hard, IMF warns
TruthLens AI Suggested Headline:
"IMF Warns Trump's Tariff Policies Could Detrimentally Impact US Economic Growth"
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TruthLens AI Summary
The International Monetary Fund (IMF) has issued a stark warning regarding the detrimental impact of President Donald Trump's tariff policies on global economic growth, particularly highlighting the adverse effects on the United States economy. In its World Economic Outlook report, the IMF forecasts a slowdown in global growth to 2.8% this year, down from 3.3% in the previous year, marking a significant deviation from historical averages. The U.S. economy is expected to experience an even sharper decline, with growth projected at only 1.8% in 2025 compared to 2.8% in 2024. These predictions represent a notable downward revision from earlier assessments made in January, which did not account for the recent surge in tariffs that have pushed the average import tax in the U.S. to its highest level in a century. The IMF attributes nearly half of the downgrade in the U.S. growth outlook to the escalating trade tensions and the uncertainty surrounding Trump's tariff policies, which have already begun to dampen domestic demand prior to the latest announcements.
Furthermore, the IMF has expressed concerns about the long-term implications of these tariffs, emphasizing that if maintained, they would yield negative consequences for economies across all regions, including North America. The IMF's chief economist, Pierre-Olivier Gourinchas, indicated that the current trajectory of trade policy uncertainty poses significant risks to global economic activity, which are predominantly weighted to the downside. In light of these developments, inflation projections have also worsened, with the IMF now anticipating a rise to 3% this year, up from an earlier estimate of 2%. The report underscores the need for a de-escalation of trade tensions and the establishment of clear trade policies, which could foster economic growth. Christine Lagarde, president of the European Central Bank, echoed these sentiments by stating that free trade has historically contributed to economic development, while higher tariffs threaten growth in Europe, although she does not foresee a recession in the Eurozone countries. The IMF's latest outlook reflects the profound changes underway in the global economic landscape as a result of shifting trade policies.
TruthLens AI Analysis
The article highlights the potential negative consequences of President Trump's trade policies, particularly in relation to tariffs and their impact on global and U.S. economic growth. The International Monetary Fund (IMF) expresses concerns over a significant downturn in economic activity, emphasizing that the U.S. will be disproportionately affected by these trade tensions.
IMF's Warnings and Economic Outlook
The IMF's forecast indicates a slowdown in global economic growth, dropping to 2.8% this year compared to 3.3% the previous year. This decline is attributed primarily to the escalating trade tensions initiated by Trump's tariffs. The prediction of U.S. growth at only 1.8% in 2025 further underscores the impact of the current trade policies. The IMF's chief economist notes that these tariffs have already begun to affect demand in the U.S., leading to a more pessimistic outlook than previously anticipated.
Impact on Global Trade Dynamics
The article suggests that the repercussions of the tariffs are not confined to the U.S. economy but will negatively affect all regions globally. This indicates a broader concern about the interconnectedness of global trade and the potential for a domino effect leading to further economic instability. The IMF’s assertion that the risks are "firmly tilted to the downside" reflects a consensus on the unpredictability and potential harm caused by Trump's trade strategies.
Political and Monetary Implications
The article touches on Trump's criticisms of the Federal Reserve and its chair, Jerome Powell, highlighting a tension between the administration and monetary policy. This aspect raises questions about the independence of central banks and their ability to manage economic policy without political interference. The suggestion that lower interest rates could exacerbate inflation adds another layer of complexity to the economic landscape.
Public Perception and Media Influence
The publication of this news may aim to shape public perception regarding the efficacy of Trump's trade policies. By framing the narrative around impending economic challenges, the article could be seen as a call to reconsider the administration's approach to tariffs and trade relations. Such coverage may influence public sentiment and political discourse, urging a reevaluation of current economic strategies.
Potential Market Reactions
This type of reporting can have immediate impacts on financial markets, as investors often react to economic forecasts. The concern expressed by the IMF could lead to volatility in stock prices, particularly in sectors heavily reliant on trade, such as manufacturing and technology. Companies that rely on imports or exports may face challenges, which could affect their stock performance as investors recalibrate their expectations based on the IMF's warnings.
Reliability and Manipulation Concerns
The article appears to be grounded in data and expert analysis from a reputable institution (the IMF), which lends credibility to its claims. However, the framing of the news could suggest an underlying agenda, particularly if it emphasizes negative outcomes without offering a balanced view of potential benefits or alternative perspectives on trade policy. The language used serves to amplify concern, which could be perceived as a manipulative tactic to influence public opinion against the current administration's policies.
In conclusion, while the information presented by the IMF is based on economic indicators and forecasts, the way these details are communicated may shape perceptions and reactions among the public and policymakers alike.