The International Monetary Fund (IMF) has released its latest World Economic Outlook during the 2025 Spring Meetings in Washington, DC, forecasting slower global growth. The Fund now projects global GDP to grow by 2.8% in 2025 and 3.0% in 2026, with the euro area expected to grow at just 0.8% and 1.2% respectively. These figures mark a notable downward revision from forecasts made just three months earlier, primarily due to rising global uncertainty. The IMF’s analysis includes both baseline forecasts and the economic fallout from a sudden and dramatic series of tariff increases in early April.
Unpredictable US Tariff Policy Deepens Global Trade Uncertainty and Paralyzes Business Planning Worldwide
A key driver of this uncertainty is the new US tariff policy announced on 2 April 2025—deemed “Liberation Day”—marking the largest tariff hike in modern US history. Just a week later, President Trump introduced a 90-day freeze on further hikes while pursuing bilateral deals, but notably excluded China, raising tariffs on Chinese goods to a staggering 145%. Although the EU benefited from a temporary reduction from 20% to 10%, even this is far above pre-April levels. With no clarity on what tariffs will look like after the freeze ends in July, businesses are left in a precarious planning environment.
IMF Slashes Growth Forecasts as US Tariff Shock Triggers Global Economic and Trade TurmoilThe IMF reports that global trade uncertainty is now seven times higher than in late 2024, even exceeding pandemic-era levels. This unpredictability is more damaging than high but stable tariffs, as it renders long-term planning nearly impossible. Firms and consumers can adapt to fixed costs, but current volatility forces them into inaction. Anecdotes from within the Trump administration suggest decisions are being made erratically, even hinging on which advisors are physically present in the room, adding to the atmosphere of chaos.
Global Markets Shaken as Political Turmoil Replaces Pandemic-Era Hope and Stability
Financial markets have not been spared from this climate of confusion. Initially buoyed by the tariff freeze, markets quickly reversed course. Unlike in past crises, where US bonds were a safe haven, post-“Liberation Day” trends show investors pulling out of US debt, indicating a sharp loss of confidence. This reversal undermines a key pillar of global financial stability: trust in the US dollar and Treasury securities. With this trust eroding, global financial markets face increased vulnerability to further shocks.
The IMF draws a clear comparison between today’s turmoil and the COVID-19 crisis—both scenarios severely disrupted global supply chains. Yet, unlike the pandemic, where there was hope of recovery via medical solutions, the current disruptions are politically driven and indefinite. Tariffs are forcing companies to reconfigure or halt supply lines without knowing if the rules will change again tomorrow. With instability coming directly from the highest levels of US policymaking, businesses and investors alike are bracing for prolonged disruption.