US president’s unpredictable tariff policy and countermeasures from US trade partners are likely to cause a heavy blow to economies worldwide, with America’s well -being affected particularly, warned.
The International Economic Organization in Washington is very skeptical of its forecasts, due to the “complex and fluid” situation at the moment. One indication of the difficulty facing economists in order to make forecasts is the fact that the IMF has only taken into account developments in the field of duties until April 4 and not necessarily all the retaliation measures between the US and China.
The IMF expects global growth to 2.8% this year, down 0.5% compared to previous estimation in January.
“We are entering a period when the global economic system as we have known it for 80 years is re-launching (…) In addition to duties, an increase in political uncertainty about trade has,” IMF chief economist Pierre-Kolivier Gurenes observed. Due to the serious impacts of duties on global trade, the Fund expects an increase in the volume of transactions of goods and services by only 1.7% this year, while just three months ago he reported +3.2%.
And though, in the near future, the global economy seems to “avoid the recession”, the impacts of duties will become “negative in all areas, this year and next year,” Gureensa said.
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— IMF (@IMFNews)
However, the risk of recession has increased significantly for both the world economy and the US in particular.
More generally, duties will act as a US supply shock, by reducing productivity and production and raising prices; and elsewhere as a demand shock, which may mean a reduction in economic activity and falling prices.
For North America, the IMF revised its forecasts for all three economies, compared to January.
He now considers that the US economy will develop 1.8% this year (a decrease of 0.9 percentage points from the previous forecast) and his Canada by 1.4% (-0.6 under January forecast).
The Mexicothe economy of which depends largely on exports to its northern neighbor, may reach a recession (-0.3% or 1.7 percentage point below the previous provision).
The global economy needs a clear and predictable trading system. If countries ease their current tariffs and forge new trade agreements, this would help improve growth prospects. ‘ blog explains.
— IMF (@IMFNews)
OR Chinawhich is the main objective of President Trump’s duties, may record the lowest growth since 1990, only 4%. And here, the IMF has revised its previous prediction.
To Japanthe other major US trade partner, the IMF provides for growth of 0.6% this year while at the beginning of the year it was talking about 1.1%.
“Duties will weaken moderate economic recovery in the eurozone”
The shock is expected to be, the growth of the economy has been revised down 0.2 percentage points and is expected to reach 0.8%.
Larger economies will suffer the most important impact. The IMF predicts zero growth for Germany0.6% for the France and 0.4% for the Italy (a corresponding reduction of 0.2 and 0.3 compared to January forecasts).
“Duties will weaken the moderate economic recovery in the eurozone, despite the increase in public spending in some countries, such as in Germany,” Gurenes said, noting that “infrastructure spending could help accelerate growth.”
Of the major economies, the most important growth, 2.5%, the Spain.
The consequence of duties will also be to increase inflation in advanced economies to 2.5%, mainly due to inflation in the US estimated to range around 3%. In developing and emerging economies (without Venezuela) inflation will be 5.5% this year and worldwide at 4.3% (+0.1%) this year to fall in 2026 to 3.6%.
