EconomyApril 23, 2025

IMF Slashes US GDP Growth Forecast Over Geopolitical Tensions, Tariff Hikes

A sharply lowered global economic growth outlook was attributed to ‘a highly unpredictable environment.’

Reported by Michael Katz

Increasing geopolitical tensions, trade conflicts and tariff hikes led the International Monetary Fund to sharply lower its 2025 global GDP growth projections to 2.8% from its January forecast of 3.3%, while slashing its U.S. economic growth forecast to 1.8% from 2.7%.

“Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments,” stated the IMF’s April World Economic Outlook report. “Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions.”

According to the IMF, it expects global growth to moderate in 2025 and then remain steady in 2026, “but at a level that is not sufficient to accelerate progress towards sustainable economic development,” adding that “tariff hikes would likely lower real wages and disrupt global supply chains.”

The IMF stated it was compelled to significantly downgrade its forecasts from just four months ago due to tariff rates that have risen to “levels not seen in a century and a highly unpredictable environment.”

The IMF also warned that tariff increases could disproportionately impact emerging markets and developing economies, as well as low-income countries. Tighter financial conditions could “exacerbate external, fiscal, and debt vulnerabilities, jeopardizing financial stability and hindering economic progress,” the IMF wrote.

According to the report, domestic policymaking is the “first line of defense” against deteriorating global financial positions. It stated that fiscal policies should “safeguard fiscal sustainability and rebuild buffers, remain growth-friendly, and catalyze public and private investments towards productivity enhancing reforms.” It also recommended that central banks continue to maintain price and financial stability in line with their mandates.

“At this critical juncture, countries should work constructively to promote a stable and predictable trade environment and to facilitate international cooperation, while addressing policy gaps and structural imbalances at home,” the report suggested. “This will help secure both internal and external economic stability,” adding that “The path forward demands clarity and coordination.”

According to the IMF, to best protect against market uncertainty and volatility, countries should work together to “promote a stable and predictable trade environment, facilitate debt restructuring, and address shared challenges.” It also stated that countries should also address domestic policy and structural imbalances, to help stabilize their economies.

“This will help rebalance growth inflation trade-offs, rebuild buffers, and reinvigorate medium-term growth prospects, as well as reduce global imbalances,” the report stated. “The priority for central banks remains fine-tuning monetary policy stances to achieve their mandates and ensure price and financial stability in an environment with even more difficult trade-offs.”