The International Monetary Fund (IMF) cut its global growth forecast on Tuesday to 2.8 percent for this year and 3 percent for 2026, a cumulative downgrade of about 0.8 percentage point relative to its January 2025 predictions.
“Since late January, a flurry of tariff announcements by the United States, which started with Canada, China, Mexico and critical sectors, culminated with near-universal levies on April 2. The U.S. effective tariff rate surged past levels reached during the Great Depression, while counter-responses from major trading partners significantly pushed up the global rate,” said the IMF in its latest World Economic Outlook.
This economic uncertainty and policy unpredictability were major drivers of the latest economic outlook. If sustained, the IMF said, this abrupt increase in tariffs and attendant uncertainty will significantly slow global growth.
Global growth remains well above recession levels
“Despite the slowdown, global growth remains well above recession levels,” the IMF said. Global inflation was revised up by about 0.1 percentage point for each year, yet the disinflation momentum continues. Meanwhile, global trade growth will dip more than output, to 1.7 percent in 2025, a significant downward revision since the January 2025 WEO Update.
However, the global estimate masks substantial variation across countries. In the United States, demand was already softening before the recent policy announcements, reflecting greater policy uncertainty. Therefore, the IMF lowered its U.S. growth estimate for this year to 1.8 percent. That’s 0.9 percentage point lower than January, and tariffs account for 0.4 percentage point of that reduction.
It also raised its U.S. inflation forecast by about 1 percentage point, up from 2 percent.
“For trading partners, tariffs are mostly a negative demand shock, driving foreign customers away from their products, even if some countries can benefit from the trade diversion. Consistent with this deflationary impulse, we have lowered our China growth forecast for this year to 4 percent, a 0.6 percentage point reduction, and inflation is revised down by about 0.8 percentage point,” added the IMF.
Tariffs impact trade partners’ growth prospects
Growth in the euro area, which is subject to relatively lower effective tariffs, was revised down by 0.2 percentage point, to 0.8 percent. Both in the euro area and China, stronger fiscal stimulus will provide some support this year and next.
Canada and Mexico also saw their growth forecasts cut. The IMF expects Canada’s economy to grow by 1.4 percent in 2025 and 1.6 percent in 2026, instead of 2 percent growth projected for both years in January. It also predicted that Mexico would be hard hit by tariffs, with its growth dipping to a negative 0.3 percent in 2025, a sharp 1.7 percentage point drop from the January forecast, before recovering to 1.4 percent growth in 2026.
Growth in the U.K. would hit 1.1 percent in 2025, 0.5 percentage point below the January forecast, then rise to 1.4 percent in 2026, reflecting the impact of recent tariff announcements.
Trade tensions and tariffs were also expected to take 0.5 percentage points off Japan’s economic activity in 2025, compared to the January forecast, with growth projected at 0.6 percent.
Middle East and Central Asia economies to grow 3 percent in 2025
The Middle East and Central Asia are projected to come out of several years of subdued growth, with the rate accelerating from an estimated 2.4 percent in 2024 to 3 percent in 2025 and to 3.5 percent in 2026 as the effects of disruptions to oil production and shipping dissipate and the impact of ongoing conflicts lessens. Compared with January’s forecast, the IMF’s projection was revised downward, reflecting a more gradual resumption of oil production, persistent spillovers from conflicts and slower-than-expected progress on structural reforms.
For sub-Saharan Africa, growth is expected to decline slightly from 4 percent in 2024 to 3.8 percent in 2025 and recover modestly in 2026 to 4.2 percent. Among the larger economies, the growth forecast in Nigeria was revised downward by 0.2 percentage point for 2025 and 0.3 percentage point for 2026, owing to lower oil prices.
Meanwhile, South Africa’s growth was revised downward by 0.5 percentage point for 2025 and 0.3 percentage point for 2026, reflecting slowing momentum from a weaker-than-expected 2024 outturn, deteriorating sentiment due to heightened uncertainty, the intensification of protectionist policies and a deeper slowdown in major economies.
