IMF Slashes Global Growth Forecast To 2.8% For 2025 Amid Rising Trade Tariffs

New Delhi, Apr 26 (KNN) Global growth prospects have dimmed considerably due to escalating trade tariffs, according to the International Monetary Fund's latest World Economic Outlook. 

The IMF has expressed significant concern over the economic shockwaves triggered by President Donald Trump's trade policies, resulting in downward forecast revisions for nearly every major economy. The global growth projection has been trimmed by 50 basis points to 2.8 percent for 2025.

The United States, the world's largest economy, is expected to experience a sharp deceleration in growth from 2.7 percent to 1.8 percent, while numerous emerging economies face substantial slowdowns. India's growth estimate has been reduced from 6.5 percent to 6.2 percent. 

These downward revisions account for tariffs announced between February 1 and April 4, though the IMF notes that even excluding April's tariffs, global growth would still decline to 3.2 percent for both 2025 and 2026. 

The timing of these tariff impositions is particularly challenging, as the global economy was already struggling with high inflation, elevated interest rates, and widespread geopolitical uncertainties.

The IMF reports that the effective tariff rate in the United States has surpassed levels not seen since the Great Depression, with the resulting ‘epistemic uncertainty and policy unpredictability’ driving the forecast revisions. Should abrupt tariff changes continue beyond Trump's 90-day pause, global growth could deteriorate further. 

Beyond the revised estimates, the IMF's assessment confirms that the world economic order established over the past 80 years is undergoing a fundamental reset. 

Many countries now acknowledge that decades of deepening trade relationships fostered rapid but unequal economic growth. 

The report highlights that several advanced economies, particularly the United States, believe globalisation ‘unfairly’ displaced domestic manufacturing jobs and are seeking to establish a new economic paradigm. 

The challenge now lies in balancing necessary changes with minimising economic disruption.

Despite these concerns, the IMF offers some reassurance that global growth prospects remain well above recession levels. 

While global inflation forecasts have been revised upward by 0.1 percentage points for both 2025 and 2026, the overall disinflation trend is expected to continue uninterrupted. 

The most significant disappointment comes in global trade outlook, which is projected to contract more severely than output, falling to 1.7 percent in 2025. 

To mitigate potential negative impacts, countries like India must prioritise trade policy stability, develop more bilateral agreements, and focus on fiscal and structural reforms to mobilise private resources while maintaining economic growth.

(KNN Bureau)