Since the start of the year, the U.S. has introduced a wave of new tariffs, with other countries responding. The resulting trade barriers are now at levels not seen in a century, surpassing even the infamous 1930 Smoot-Hawley tariffs, which many economists believe deepened the Great Depression. These trade disruptions are sending shockwaves through the economy, dampening investor confidence and casting doubt on future growth.
The IMF also scaled back its global outlook. It now expects worldwide growth to hit 2.8% in 2025 and 3% in 2026, both lower than its January forecast of 3.3%. In Europe, growth is expected to slow to 0.8%, while emerging markets are projected to expand by just 3.7% in 2025 and 3.9% in 2026. Some of the steepest downgrades were seen in countries most impacted by tariffs. China, for example, saw its growth forecast cut to 4% for both years, a notable drop from earlier projections.
IMF chief economist Pierre-Olivier Gourinchas told reporters that while a U.S. recession isn’t in the base case, the risk is climbing. The IMF now sees about a 37% chance of a downturn, up from 25% earlier this year. Truth be told, no one is sure of the future.
I am interested to see how these forecasts and growth outlooks are going to change over time. I think with the recent aggressive policies proposed and imposed by Trump have made just started to make their impact and things might only get worse as time goes on.
ReplyDeleteThis update from the IMF shows just how serious the trade tensions have become. Cutting the U.S. growth forecast by nearly a full percentage point is a big move, and the comparisons to Smoot-Hawley are especially worrying. It feels like uncertainty is becoming the new normal, and that's not a great environment for investors or businesses trying to plan ahead.
ReplyDeleteThe IMF's downgrade highlights how fragile global growth has become under escalating trade tensions. What's especially concerning is that even without a formal recession in the forecast, the slowdown in both advanced and emerging economies shows how interconnected the risks are. Tariffs might have protected domestic industries, but the ripple effects, reduced investment, shaken confidence, and weaker demand are taking a toll. We're seeing the cost of economic uncertainty play out in real-time.
ReplyDeleteThese recent tariffs being compared with the Smoot Hawley tariffs should not be taken lightly. If the comparisons are accurate, we truly must brace for the worst.
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