IMF, "optimistic" about the future - Increases forecast for the global economy, due to lower tariffs
The International Monetary Fund (IMF) slightly raised its forecast for global economic growth in 2025 as shocks from tariffs and financial conditions turned out to be less severe than expected. However, the IMF warned that a renewed trade war between the United States and China could significantly slow global output.
The IMF said in its World Economic Outlook Report that recent trade deals between the US and several major economies have averted the worst of Trump's threatened tariffs, leading to the second forecast upgrade since April.
Real global GDP growth is expected to be 3.2% in 2025, down from 3.0% in July and a lower forecast of 2.8% in April, realized after Trump imposed broad “reciprocal” tariffs. The IMF also projects growth of 3.1% in 2026, unchanged from its July forecast.
In addition to lower-than-expected tariff rates, global manufacturing has been supported by the private sector pre-empting imports and rapidly reorienting supply chains, as well as a weaker dollar and fiscal stimulus in Europe and China. Investment in artificial intelligence also played a significant role.
But Trump has muddied the situation again, threatening 100% tariffs on Chinese goods, on top of the existing average rate of 55%, in retaliation for Beijing's expanded controls on rare exports. An escalation between the two superpowers could significantly lower growth forecasts and add to the uncertainty that is holding back investment and spending.
In a negative scenario presented in the report, which models tariffs 30 percentage points higher than current levels on goods from China, and 10 percentage points higher for Japan, the euro area and emerging markets in Asia, the IMF calculates that this would reduce global growth in 2026 by 0.3 percentage points. The negative impact would increase to more than 0.6 percentage points by 2028.
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