Reuters reports the International Monetary Fund slashed its 2025 growth forecast for the United States by 0.9 percentage points to 1.8%. The downgrade came after President Donald Trump announced universal tariffs on nearly all trading partners in April. The IMF cited policy uncertainty and trade tensions as primary factors behind the revision.

The organization cut its global growth forecast by 0.5 percentage points to 2.8% for 2025. IMF Chief Economist Pierre-Olivier Gourinchas stated the tariffs now at 100-year highs represent a negative supply shock. The forecast reflects Trump's April 2 tariff announcements but excludes subsequent developments like the 90-day pause on higher rates.

US inflation expectations rose to 3% in 2025, one percentage point higher than January projections. CNBC notes the organization increased US recession probability to 40%, up from 25% in October 2024.

Global Economic Impact Spreads Across Major Economies

World Economic Forum analysis shows tariff policies push the global economy toward significant slowdown. The IMF downgraded growth forecasts for most countries, including Canada to 1.4% and Mexico to negative 0.3% in 2025.

China faces a 1.3 percentage point impact from tariffs in 2025, though stronger fiscal measures provide offset. Euro Area growth slows to 0.8% in 2025, with Germany projecting minimal expansion. UNCTAD warns global growth may slow to 2.3% this year, falling below the 2.5% threshold associated with global recession phases.

Economic Policy Uncertainty Index reached its highest levels this century in early 2025. Global trade growth faces sharp deceleration from 3.8% last year to 1.7% this year according to IMF projections.

Financial Institutions Respond to Market Volatility

Reuters reports major US bank executives warned of economic turbulence from tariffs despite first-quarter profits beating forecasts. JPMorgan CEO Jamie Dimon urged regulatory changes to help banks handle potential market disruptions.

Regional banks face particular challenges due to limited income diversification. PYMNTS notes the KBW Regional Banking Index dropped 13% following tariff announcements. Western Alliance Bancorp and East West Bancorp experienced double-digit losses as institutions remain vulnerable to economic slowdowns.

BlackRock analysis shows financial firms expect tariffs to lower growth and boost inflation globally. The asset manager lowered 2025 GDP growth expectations to 0% while raising core inflation expectations to 3.8%.

Broader Economic Implications and Market Response

Reuters polling shows 60% of economists view global recession risks as high or very high this year. Three-quarters of economists cut their 2025 global growth forecasts, bringing median projections to 2.7% from 3.0% in January.

J.P. Morgan increased global recession probability to 60% from 40% previously. The firm cited disruptive US policies as the biggest risk to global outlook. Financial markets experienced significant volatility, with the S&P 500 down over 8% following tariff announcements.

IMF analysis suggests the global economic system undergoes fundamental reset. Trade tensions could further depress growth if sustained, while improved international cooperation could immediately enhance growth prospects.

Emerging markets face particular vulnerability due to external volatility from tariff adjustments. More than half of low-income countries currently experience debt distress or high risk levels. The report recommends fiscal authorities implement gradual consolidation plans while maintaining targeted support for affected populations.

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