The IMF confirms market fears

“The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity,” the International Monetary Fund announced today. “You don’t say,” muttered exhausted investors everywhere.

The IMF now has the numbers to prove what everyone already knows: Tariffs are beginning to make their effects felt on the global economy.

• The IMF forecasts the US economy will only grow 1.8% this year, down 0.9% from its January estimate made before tariffs hit.
• The US will grow just 1.7% in 2026, a 0.4% drop from previous estimates.
• For reference, the US economy expanded 2.8% in 2024.

That’s not all: America, historically the star student boosting the world’s economy, is now the class clown dragging down everyone else’s average.

• The IMF cut its forecast for global output growth for 2025 to 2.8%, which would be the slowest worldwide GDP growth since the pandemic in 2020—and the second worst since 2009.
• A bigger share of global growth over the next five years will come from China and India, while the US’ position in the world’s economy will shrink.
• The IMF raised the odds of a global recession to 40%, up from 25% in its October forecast.

These numbers back up the World Trade Organization’s latest outlook released last week, which forecast a 0.2% decline in world merchandise trade in 2025. But the WTO also projects a rebound in 2026.

Is the IMF the canary in the coal mine?

Sure, the stock market may have lost its mind over Trump’s tariff policy, but for a while, the data actually looked OK: Retail sales came in strong, inflation decelerated, and even the job market numbers have been just fine.

But now, the actual impact of Trump’s tariffs is beginning to show up in the economic data—and the numbers aren’t painting a pretty picture. We’ll first see the damage tariffs have done in macroeconomic forecasts like those from the IMF and the WTO, then in corporate earnings, and then, possibly months down the line, your wallet.

Zoom out: The US economy is gigantic, and subject to tons of influences beyond just tariffs. Add in the White House’s policy unpredictability, and investors are left with questions than answers. That’s why everyone from analysts to economists is warning us to expect the unexpected.—LB