Trade wars, tariffs, and global uncertainty decreased US growth to 1.8%, which is 0.9% lower than forecasted in January 2025, according to International Monetary Fund (IMF) Chief Economist Pierre-Olivier Gourinchas during the World Economic Outlook press briefing on Tuesday, April 22.
While the IMF raised its estimate of recession risk to 40%, up from 25%, this isn’t the base case, and it reported that the US economy had started weakening before US President Donald Trump announced tariffs against 90 countries.
Meanwhile, JP Morgan increased the probability of recession in the US to 60% for 2025, up from 40%.
“The US economy is coming from a position of strength,” IMF Chief Economist Pierre-Olivier Gourinchas said during the briefing. “It was growing very rapidly, the labor market was very robust. We’ve seen some signs of slowdown in the US economy even before the tariff announcements. Only a part of the decrease – 0.4% out of 0.9% – is coming from tariffs. Some of it is also coming from the weakening momentum.”
The US trade wars also impacted global growth, which the IMF sees decreasing by 0.8% in 2025. Previously, the IMF projected overall 3.3% growth for 2025, but now expects that to decelerate to 2.8% by the end of 2025.
“We’re entering a new era as the global economic system that operated for the last eight years is being reset,” Gourinchas said during the briefing.
The policy uncertainty, caused by trade wars, is the key driver for increasing pessimism over the global economy’s future.
For the US, tariffs will reduce productivity and output “permanently,” while increasing price pressures “temporarily,” according to Gourinchas.
Half a year ago, the US economy was in much better shape.
US economic growth had been strong with a disinflationary trend and “diminished” recession risk, Pierre-Olivier Gourinchas had replied in response to a question by Kyiv Post. But this is no longer the case for the US economy.
The policy uncertainty will also put risk on the US dollar, making it a less favorable asset for global investment.