IMF lowers forecast: Trump's tariffs are slowing down the global economy

Washington (dpa) - In view of US President Donald Trump's aggressive tariff policy, the International Monetary Fund is anticipating a global slowdown in growth and is also lowering its forecast for Germany. The Washington-based fund assumes zero growth for Germany this year, according to data from the new economic forecast. This is 0.3 percentage points less than assumed in January.

The IMF has also lowered its forecast for the global economy. At 2.8 percent, growth is expected to be significantly slower than forecast in January (minus 0.5 percentage points). The global economy is being put to a "tough test", writes IMF chief economist Pierre-Olivier Gourinchas with a view to the trade disputes. This is a "new era" and the global economic system is being readjusted.

How the IMF views Germany and the eurozone

The German economy is in a long phase of weakness. The IMF's central forecast sees Germany once again bringing up the rear among the G7 industrialized nations in terms of growth this year. While the IMF forecast confirms that Germany will come to a standstill this year, leading German economic research institutes had predicted a mini-growth of 0.1% of gross domestic product (GDP). The current German government wants to lower its economic forecast again and also expects stagnation this year.

The IMF is only more optimistic for the coming year, when it expects growth of 0.9% - but that is still 0.2 percentage points less than forecast in January.

Economic growth in the eurozone is expected to fall by 0.2 percentage points to 0.8% this year compared to the January forecast. The IMF cites uncertainty and tariffs as the main reasons for this. Growth in the eurozone is expected to reach 1.2% in 2026 (minus 0.2 percentage points). According to the IMF, the upturn will be driven by rising consumption due to real wage growth and more fiscal leeway in Germany in view of the easing of the debt brake for defense.

A forecast in an extraordinary situation

The IMF emphasizes that the global economic forecast was prepared under "special circumstances". The background to this is the tough tariff package announced by Trump on April 2, which includes both universal and now temporarily suspended reciprocal tariffs. According to the fund, the forecasts that were almost finalized at the time had to be thrown overboard. "Although many of the planned tariff increases have been put on hold for now, the combination of measures and countermeasures has driven tariffs in the US and globally to a century high."

The global economy has proven to be surprisingly resilient during the severe shocks of the past four years and still bears considerable scars, it is said. There is now a risk that trade tensions could increase further as a result of retaliatory measures, and inflation could also be fueled again. The uncertainty is weighing on growth. In view of the complex situation, the fund has presented two further forecasts in addition to its central forecast, the so-called reference forecast.

Several forecasts due to customs uncertainty

The reference forecast takes into account all customs announcements up to April 4. According to this forecast, the global economy will grow by just 2.8% this year and by 3% next year (minus 0.3 percentage points). In 2024, growth was still estimated at 3.3%. A forecast that only takes into account tariff announcements up to March 12 - including a first wave of US punitive measures against China, Canada and Mexico as well as US tariffs on steel and aluminum imports - sees growth at 3.2% this year and next.

A model-based forecast, which also takes into account tariff announcements after April 4 such as the pause in reciprocal tariffs, sees global economic growth at around 2.8 percent this year and around 2.9 percent in 2026. According to the report, this is roughly in line with the estimates for global growth in the reference forecast, albeit with a different composition of growth rates in the individual countries. None of the forecasts predict a recession. The individual country forecasts refer to the reference forecast.

This worries the IMF

The IMF is very concerned about trade policy. An intensification of the trade conflict would have a negative impact on global economic growth, although individual countries would be affected differently. "Those directly targeted by the new tariffs would be hardest hit, especially China and the United States, but also a large number of countries in Asia and Europe in the medium term," says the IMF.

Unlike in the previous century, the global economy is now closely intertwined economically and financially. A break-up of these supply chains and financial flows could result in major economic upheaval. The reduction in competition would also lead to fewer incentives for innovation. In general, the fund anticipates a decline in overall productivity due to tariffs, which in turn will lead to higher production costs and prices.

The fund has also revised its forecast for the inflation rate upwards. In the industrialized nations, it is expected to average 2.5% (up 0.4 percentage points) in 2025 and 2.2% (up 0.2 percentage points) in the coming year. Central banks generally aim for 2 percent. With regard to the economy, the fund states: "If countries de-escalate their current tariff policies and coordinate to ensure clarity and stability in trade policy, the outlook could brighten immediately.