The global economy is expected to experience a significant deceleration largely due to the impact of President Donald Trump’s tariffs and the lingering uncertainty surrounding them, the International Monetary Fund (IMF) announced on Tuesday.
According to the IMF’s latest World Economic Outlook, worldwide economic growth is now projected to be only 2.8 percent for the current year. This marks a noticeable downgrade from the 3.3 percent growth forecast the Fund had issued in January. The outlook doesn’t improve much in the near future either. By 2026, global growth is anticipated to reach just 3 percent—again, a downgrade from the earlier estimate of 3.3 percent.
Both the United States and China, the two largest economies in the world, are facing notable slowdowns, the report stated. The United States is expected to grow by only 1.8 percent this year. That’s a significant drop from the IMF’s previous forecast of 2.7 percent and is also a full percentage point lower than the U.S. growth rate recorded in 2024. While the IMF does not foresee a recession for the United States, it has raised the probability of one occurring this year from 25 percent to approximately 40 percent.
Meanwhile, China’s economic prospects are also dimming. The IMF now expects China’s economy to grow by 4 percent in both 2025 and 2026. This figure represents a reduction of about half a percentage point from the IMF’s earlier predictions for the country.
Pierre-Olivier Gourinchas, the IMF’s chief economist, commented on the broader implications of these shifts in global economic momentum. “We are entering a new era,” he said. “This global economic system that has operated for the last eighty years is being reset.”
In essence, the IMF’s updated projections paint a picture of a world grappling with the consequences of rising trade barriers and policy uncertainty. These changes are not isolated to one country or region, but rather reflect a broader transformation in the underlying dynamics of the global economy.
The IMF’s warning adds weight to growing concerns among economists and policymakers who have been wary of the long-term consequences of the protectionist measures enacted during Trump’s presidency. Those policies included sweeping tariffs on imports from key trade partners, including China, and led to prolonged trade tensions that shook investor confidence and disrupted global supply chains.
The Fund emphasized that the lasting effects of those tariffs continue to reverberate across the global economic landscape. They have added friction to international trade, discouraged investment, and increased costs for businesses and consumers alike. While the tariffs were initially introduced with the intention of protecting American industries and narrowing the trade deficit, the IMF’s findings suggest they have had broader negative repercussions.
According to the report, the combination of policy uncertainty and tariff-related disruptions has played a central role in weakening global output. While some of the economic deceleration may be attributed to cyclical factors, such as the natural slowing of economies after periods of rapid growth, the IMF points out that structural shifts are also underway.
The reset of the global economic system, as referenced by Gourinchas, likely points to the ongoing fragmentation of the world economy into competing blocs. With geopolitical tensions rising and countries increasingly focusing on domestic resilience, the decades-long era of globalization appears to be giving way to a more fragmented and uncertain world order.
This transformation has made it more difficult for multinational businesses to operate seamlessly across borders, slowed innovation that relies on cross-border collaboration, and increased the complexity of managing supply chains. These developments, in turn, have made it more difficult for economies to bounce back quickly after shocks.
The IMF’s data indicates that the slowdown is not just limited to the United States and China. Other economies are also experiencing reduced momentum, although the Fund did not provide specifics for every region in this particular update. The report, however, implies that the ripple effects of the U.S.-China trade tensions are being felt far and wide.
Despite these sobering projections, the IMF stopped short of predicting a global recession. While growth is slowing, it remains positive across most major economies, and there are still pockets of resilience that could help sustain moderate expansion in the near term.
Still, the IMF’s increased estimate of a 40 percent chance of a U.S. recession indicates a significant degree of caution. This revision reflects growing concern over tight monetary policies, softening consumer spending, and weakening investment trends. The economic uncertainty tied to geopolitical factors and future trade policies only adds to that caution.
The shift in the IMF’s forecast underscores the fragile nature of the current recovery phase. Many economies are still contending with the aftermath of the COVID-19 pandemic, supply chain disruptions, and inflationary pressures. These ongoing challenges have complicated the policy choices facing central banks and governments around the world.
Gourinchas’ remark about a reset of the global economic system highlights the broader sense of transformation that is underway. With traditional assumptions about trade, investment, and cooperation now being questioned, economic institutions and policymakers are being forced to reevaluate their approaches.
The IMF’s report is likely to intensify debates about how best to adapt to this new landscape. Questions around whether to maintain open markets or lean further into economic nationalism are becoming increasingly urgent, especially as global growth cools and inequality widens.
In conclusion, the IMF’s revised outlook signals a critical turning point for the global economy. The effects of Trump-era trade policies continue to be felt, and the uncertainty they introduced has made the path forward more complicated. As the world navigates this period of transition, the focus will be on how well countries can adapt to the new realities of a slower, more fragmented global economy.
With the global growth forecast now set at 2.8 percent for this year and 3 percent for 2026, the IMF has sent a clear message: the era of stable, predictable globalization is fading. The new chapter will likely involve more economic headwinds, tighter coordination challenges, and evolving strategies to maintain growth in a changing world.
“We are entering a new era,” Gourinchas reiterated, “This global economic system that has operated for the last eighty years is being reset.”