President Donald Trump’s trade war is expected to re -regulate economic growth worldwide this year, in large part because it is likely that its aggressive use of tariffs despite much about the United States, the world’s largest economy.
The economic projections were published on Tuesday by the International Monetary Fund, after Trump’s decision to raise tariffs to levels that had not been seen since the Great Depression.
The president has imposed a 10 percent tariff on almost all imports, along with punitive levies of at least 145 percent on Chinese products that enter the United States. Trump also imposed what he calls “reciprocal” tariffs on the largest business partners in the United States, among which are the European Union, Japan, South Korea and Taiwan, although he has suspended them until July while his government works to guarantee bilateral trade agreements.
Trump’s approach has created paralyzing uncertainty for American companies that export products abroad or that depend on foreign supplies for their merchandise, braking production precisely when economies around the world were stabilized after years of severe inflation. China and Canada have already taken reprisals against Trump’s tariffs with their own commercial barriers, and the European Union has said that it is willing to increase the encumbrances if the United States continues with its planned tax of 20 percent.
The world economy perspectives reports that world production will slow down to 2.8 percent this year, from 3.3 percent in 2024. In January, the fund predicted that growth would remain stable in 2025.
The IMF also provides that production will be slower next year than it had previously predicted.
Much of the decline for this year can be attributed to the impact of tariffs on the US economy, which was already there to lose impulse this year. The IMF hopes that US production slows up to 1.8 percent in 2025, compared to 2.8 percent of last year. This means almost a percentage point less than the 2.7 percent growth that the IMF provided for the United States in January, when it was the strongest economy in the world.
“The world economic system that has worked during the last 80 years is being restored,” said Pierre-Olivier Gourinchas, chief economist of the IMF, at an informative meeting with reporters this week. “The effective tariff of the United States has already exceeded the levels reached in the early twentieth century. Beyond the tariffs themselves, the increase in uncertainty about policies – related to commercial policy, but also in a broader sense – is an important engine of economic perspectives.”
IMF forecasts also make it clear that tariffs could complicate efforts to contain inflation. The fund has raised its inflation forecast for the United States this year to 3 percent from 2 percent.
Gourinchas said Tuesday that the increase in pressures on prices derived from tariffs would be probably temporary in the United States, but that the reduction of productivity and production would be permanent. Although the IMF does not foresee a recession in the United States, the risk of such deterioration has increased to 40 percent from 25 percent last October.
Growth forecasts in China and Europe also descended, but the IMF suggested that the tax support of its governments could help cushion the tariff’s coup.
The IMF pointed out that its forecasts were subject to many difficult variables to predict. The Trump government has already postponed some of the tariffs that it imposed, and is rushing to negotiate trade agreements with dozens of countries with the hope of reducing the so -called reciprocal tariffs that promulgated on April 2.
However, the largest economies in the world – United and China – seem engaged in a prolonged economic confrontation that could overwhelm the world economy until an agreement is reached.
Trump has indicated that he is prepared to adjust his tariffs when the markets become excessively volatile, as happened earlier this month. However, he has not given any sign that he intends to reverse.
“We must rebuild the richness of our great country, and create a true reciprocity,” Trump wrote at his social media site, Truth Social, during the weekend. “But for those who want the easiest way: come to the United States and build in the United States!”
In recent days, Trump has intensified his public criticism to Jerome H. Powell, president of the Federal Reserve, whom he accused of “playing politics” and acting too slowly to lower interest rates.
When asked about the possibility that Trump tries to dismiss Powell before he finishes his mandate as president of the reserve next year, Gourinchas argued that it is important that the markets believe that the central banks will do what is necessary to maintain inflation under control.
“Central banks must remain credible, and part of that credibility is based on their independence,” he said. “And then, from that perspective, it is very important to preserve that.”
The IMF has been warning that the fragmentation of the world economy and the growing commercial tensions could be a threat to world productivity and growth. Gourinchas wrote in the report that the possibility that countries can raise their tariffs at even higher levels raises important risks for the growth prospects of the world and the poorest countries in particular.
“The world economy showed a surprising resilience during the serious shocks of the last four years and still drag considerable scars,” said Gourinchas. “It is now being subjected to a hard test, especially in emerging and developing market economies with more limited shock absorbers.”