Trade uncertainty could worsen global economic challenges, IMF warns

Disruptions to global supply chains caused by the uncertainty surrounding tariff hikes and trade tensions could worsen an already complex economic landscape, according to Pierre-Olivier Gourinchas, chief economist of the International Monetary Fund (IMF).

His remarks followed the IMF’s latest downgrade of its global economic growth projections, unveiled in the World Economic Outlook report released on Tuesday.

The IMF now forecasts global growth at 2.8 percent for 2025, a sharp 0.5 percentage points reduction from its January estimate, with a further slowdown to 3 percent projected for 2026.

This downward revision follows the United States’ announcement of sweeping “reciprocal tariffs” on April 2, which has driven global tariff rates to their highest levels in a century, creating what the report describes as “a major negative shock” to global economic growth.

Advanced economies face particular headwinds, with collective growth expected at just 1.4 percent in 2025 and 1.5 percent in 2026. The United States saw the most dramatic revision — its 2025 outlook slashed by 0.9 points to 1.8 percent due to mounting policy uncertainty, intensifying trade tensions, and softening domestic demand.

“As you have this uncertainty about tariffs and trade relations, some of these frictions could get amplified along the supply chains. You don’t know if your suppliers are going to be there. You don’t know if your customers are going to be there. The supply chain may have to be reoriented. That injects another layer of uncertainty to a situation that’s already quite complex,” said Gourinchas.

The report warns that if trade tensions escalate further, global growth could face an even steeper decline and trigger significant volatility in financial markets.

The IMF calls on countries to enhance dialogue, stabilize trade policies, and maintain the independence of monetary policies to strengthen global economic resilience and prevent the buildup of risks that could lead to uncontrollable situations.