What's happened
The International Monetary Fund (IMF) has downgraded its global growth forecast to 2.8% for 2025, attributing the decline to U.S. tariffs and rising economic uncertainty. U.S. growth is projected at 1.8%, with recession odds increasing to 37%. The report highlights significant slowdowns across major economies, including the UK and China.
What's behind the headline?
Economic Impact of Tariffs
- The IMF's forecast reflects a significant slowdown in global economic growth, now projected at 2.8% for 2025, down from 3.3% earlier this year.
- U.S. economic growth is expected to be just 1.8%, a stark decline from previous estimates, indicating that Trump's tariffs are having a tangible negative effect on the economy.
Rising Recession Risks
- The likelihood of a U.S. recession has increased to 37%, with some economists estimating it as high as 60%. This uncertainty is causing businesses to hesitate on investments, further stalling growth.
- The IMF's chief economist, Pierre-Olivier Gourinchas, noted that we are entering a 'new era' of economic conditions, suggesting that the long-standing global economic framework is being fundamentally altered.
Global Repercussions
- The tariffs have not only affected the U.S. but have also led to slower growth forecasts for other major economies, including the UK and Germany. The UK is projected to grow by only 1.1% this year, while Germany's economy is expected to flatline.
- The IMF's report underscores the interconnectedness of global economies, where U.S. trade policies can have ripple effects worldwide, impacting everything from inflation rates to consumer spending.
What the papers say
According to the AP News, the IMF has cut its global growth forecast to 2.8% due to the impact of U.S. tariffs, which have created significant uncertainty in the market. The Guardian highlights that the IMF's assessment indicates a 'major negative shock' to the world economy, with every major economy expected to feel the effects. The Mirror notes that the U.S. is particularly vulnerable, with its growth forecast slashed by 0.9 percentage points, largely due to the tariffs. Meanwhile, the South China Morning Post emphasizes that the IMF's predictions align with private-sector economists, who are increasingly concerned about the likelihood of a recession. This consensus across various sources illustrates the widespread concern regarding the economic implications of Trump's trade policies.
How we got here
The IMF's revised forecasts come in the wake of President Trump's aggressive trade policies, which have introduced tariffs on numerous countries. These measures have created uncertainty in global markets, impacting consumer confidence and economic growth projections worldwide.
Go deeper
- What are the implications of the IMF's forecast?
- How do Trump's tariffs affect global economies?
- What can consumers do in response to rising recession risks?
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