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A woman walks past the International Monetary Fund ahead of the International Monetary Fund/World Bank Spring Meetings in Washington, DC, on April 17, 2025.
Tariffs are creating significant obstacles for both the United States and global economies, prompting the International Monetary Fund (IMF) to lower its growth predictions for 2025.
Recently introduced “reciprocal” tariffs by former President Donald Trump have had a profound impact on the stock market, with the S&P 500 witnessing a 9% decline since their announcement. This development has also elicit counter-responses from other nations involved in international trade.
The IMF highlighted in the executive summary of its April 2025 World Economic Outlook that the tariffs represent a substantial negative shock to economic growth.
The updated report presents a “reference forecast” for global economic growth and inflation, utilizing data available as of April 4. This forecast accounts for the introduction of tariffs while not factoring in more recent changes, such as a 90-day pause on augmenting tariffs and exemptions on certain technology products.
In light of the latest data, the IMF has revised its growth forecast for the U.S. to 1.8% in 2025, a reduction of 0.9 percentage points from what was previously anticipated in January.
Global growth estimates have also been adjusted, now projected at 2.8% for 2025, down 0.5 percentage points from earlier forecasts.
IMF Chief Economist Pierre-Olivier Gourinchas explained that the rapid development regarding tariffs compelled the institute to abandon nearly finalized projections and expedite a typical production cycle that usually spans more than two months into just ten days.
“The common theme is that tariffs inject a negative supply shock into the economies that implement them,” Gourinchas remarked.
Rising Inflation Expectations for Developed Economies
The IMF has also adjusted its inflation expectations for advanced economies, which include the United States, the United Kingdom, and Canada, now predicting a rate of 2.5% for 2025. This marks an increase of 0.4 percentage points from the January forecast.
Specifically, the inflation outlook for the U.S. has been upgraded by 1 percentage point from the prior estimate, reflecting a situation where prices are expected to rise above the 2% threshold.
The IMF attributes this increase to persistent inflationary pressures in the services sector, coupled with a recent rise in the prices of core goods, excluding food and energy, as well as the ramifications of the recently imposed tariffs.
In contrast, downward revisions have been noted in inflation estimates for several emerging markets and developing economies. The IMF indicated that the impact of tariffs on central banks’ ability to control inflation will depend on how the tariffs are perceived—whether they are temporary measures or expected to persist.
Past instances of market volatility have generally resulted in a stronger U.S. dollar against other currencies, creating upward inflationary pressures abroad. However, recent market declines have reversed this trend, affecting the strength of the dollar.
“The relationship between tariffs and exchange rates is complex,” Gourinchas noted. “In the medium term, the dollar may weaken in real terms if these tariffs lead to reduced productivity in U.S. tradable goods relative to global counterparts.”
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