'Negative shock': IMF downgrades growth forecast for U.S.

Tom Howell, Jr. | April 22, 2025

(The Washington Times) — The International Monetary Fund slashed its 2025 growth forecast for the U.S. economy to 1.8%, a 0.9-point decrease from January, spurred by President Trump’s trade actions and policy uncertainty.

The IMF’s World Economic Outlook report focused heavily on Mr. Trump’s “Liberation Day” announcement on April 2 that imposed a blanket 10% tariff on imports and threatened higher tariffs on dozens of trading partners, pending a 90-day pause.

“This on its own is a major negative shock to growth,” the IMF wrote in its executive summary.

The IMF slashed its global growth forecast to 2.8%, a 0.5-point decrease from its earlier estimate.

The report offers a “reference forecast” based on information available as of April 4 so it would incorporate Mr. Trump’s announcement on April 2 but may not account for the 90-day pause in reciprocal tariffs and exclusions in hefty Chinese tariffs for certain electronics.

“The April 2 Rose Garden announcement forced us to jettison our projections — nearly finalized at that point — and compress a production cycle that usually takes more than two months into less than 10 days,” IMF chief economist Pierre-Olivier Gourinchas said.

The IMF put the odds of a U.S. recession at 40%, up from 25% in October.

Tariffs are a tax or duty paid by importers on the goods they bring in from foreign markets.

Mr. Trump says tariffs are a great way to force companies to return to America or keep their operations in the U.S., employ American workers and create revenue to fund domestic programs.

Foreign countries don’t pay the tariffs directly to the U.S. Treasury. In many cases, U.S. companies will pay the levies, and they might pass on at least some of the cost to consumers through higher prices.

Mr. Gourinchas wrote that tariffs “are a negative supply shock for the economy imposing them, as resources are reallocated toward the production of noncompetitive goods, with a resulting loss of aggregate productivity, lower activity, and higher production costs and prices.”

Vice President J.D. Vance, speaking in India on Tuesday, said the tariffs might spur “profound changes,” but the rebalancing of trade rules will be good for the U.S. and partner nations in the long run.

Wall Street has been on a roller-coaster ride as it tries to digest the path forward.

U.S. stocks tumbled Monday as Mr. Trump attacked Fed Chair Jerome Powell in harsh terms, though Wall Street rebounded early Tuesday, with all major indexes in positive territory.