IMF Cuts U.S. Growth Forecast Amid Trump’s Moves on Tariffs

What Happened?

President Donald Trump’s unpredictable tariff moves have caused the major financial agency of the United Nations to predict a heavy downturn this year.

The International Monetary Fund lowered its 2025 projections for U.S. growth to 1.8%, compared to a 2.8% expansion in 2024.

'If sustained, this abrupt increase in tariffs and attendant uncertainty will significantly slow global growth,' IMF said in its latest forecast.

The agency stated that the U.S. effective tariff rate surged past levels reached during the Great Depression, while counter-responses significantly spiked the global rate.

IMF’s chief economist, Pierre-Olivier Gourinchas, pointed to lower consumer confidence ratings and consumption indicators as additional factors in its April 2025 World Economic Outlook.

The University of Michigan Surveys of Consumers recently revealed that its Consumer Sentiment Index plunged 11% this month, as 12-month inflation expectations surged its highest since 1981.

It marked the second-lowest reading on records going back to 1952.

Gourinchas adds that demand in the U.S. was already softening before the recent policy announcements, reflecting greater policy uncertainty.

Why it Matters

Surveys of Consumers Director, Joanne Hsu, highlighted that consumers reported multiple warning signs in its Consumer Sentiment Index that raised the risk of recession.

The number of consumers anticipating a rise in unemployment has reportedly increased to its highest since 2009.

According to reports, tariff negotiations are underway after the Trump administration met with a Japanese delegation last week and South Korea set to meet this week.

President Trump authorized a 90-day pause on the sweeping tariffs announced on April 2, except those on China.

It keeps the world's two largest economies at odds which threatens to drag in other nations.

China had hiked its levies on U.S. imports to 125% after the Trump administration imposed a minimum tariff of 145% on Chinese goods.

China’s Ministry of Commerce warned other countries against striking a broader economic deal with the U.S. at its expense, after accusing Washington of abusing tariffs.

China-based analyst Bo Zhengyuan told Reuters, 'The fact is, nobody wants to pick a side' as China and the U.S. go tick-for-tack with higher levies.

Global leaders like Spain’s Prime Minister, Pedro Sánchez, believe trade wars impact everyone and the world needs China and the United States to talk.

How it Affects You

The strong displays of tariff retaliation provide a clear outlook into the growing market challenges.

Trump aims to address the U.S. goods trade deficit, but his struggles with China could increase the likelihood of a recession.

Growth in the U.S. could potentially drive down by two percentage points this year due to these actions.

Consumers and business owners are closely monitoring these trends as the Trump administration aims to reverse the U.S. global trade imbalances.