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The International Monetary Fund warned on Tuesday that the global economy is set to enter a “new era” marked by “significantly” slower economic growth caused by tariff chaos and uncertainty brought about by President Donald Trump.
“The global economic system under which most countries have operated for the last 80 years is being reset, ushering the world into a new era,” the financial agency wrote in a blog post. The IMF noted the flurry of tariffs Trump has levied or threatened against hundreds of countries and major trade partners.
“The resulting epistemic uncertainty and policy unpredictability is a major driver of the economic outlook. If sustained, this abrupt increase in tariffs and attendant uncertainty will significantly slow global growth,” the IMF wrote. The agency reported that when tariffs were factored into their World Economic Outlook (WEO) models, global growth forecasts decline “to 2.8 percent and 3 percent this year and next, a cumulative downgrade of about 0.8 percentage point relative to our January 2025 WEO update.”
The agency added that “some countries may confront steeper trade-offs between inflation and output. In others, inflation expectations may become less-well anchored, with a new inflation shock following closely after the prior one.”
Without the tariffs Trump announced in April, the IMF forecasted that “global growth would have seen only a modest cumulative downgrade of 0.2 percentage point, to 3.2 percent for 2025 and 2026.”
The International Monetary Fund is not the only major financial institution warning that the Trump tariff regime will have serious consequences for the international and local economies.
On Monday, the Institute of International Finance predicted that a “shallow recession” would soon hit the United States. Apollo Global Management’s Chief Economist Torsten Sløk wrote on Saturday that “there is now a 90% chance of what can be called a Voluntary Trade Reset Recession (‘VTRR’)” in the United States.
“Implementing extremely high tariffs overnight hurts many businesses; particularly small businesses because the tariff must be paid by the business when the imported goods arrive in the US. Small businesses that have for decades relied on a stable US system will have to adjust immediately and do not have the working capital to pay tariffs. Expect ships to sit offshore, orders to be canceled, and well-run generational retailers to file for bankruptcy,” Sløk wrote.
American companies are already feeling the sting. On Friday, Mack Trucks — one of the largest employers in Pennsylvania — announced it would be laying off hundreds of employees as global demand for their product decreased. Volvo has also announced that it may lay off up to 800 employees at facilities throughout the United States as they assess the impact of the current and future tariff regime. DHL Express has suspended any deliveries to the U.S. worth over $800.
Goldman Sachs estimated in a report published this week that Trump’s tariffs would hurt employment five times more than it would help, with the firm figuring a broad, 10-percent increase in import taxes would create 100,000 manufacturing jobs — but kill 500,000. “The high costs of new tariffs threaten investment, jobs, supply chains and, in turn, America’s ability to outcompete other nations,” the National Association of Manufacturers said in a statement in early April, according to Axios.
All the while, the massive trade deals Trump promised after he paused some of the tariffs as the markets cratered have yet to manifest. The president seems to be in talks with plenty of world leaders, but outside of scattered, individualized investments by major international corporations looking to escape the wave of taxation, negotiations with major trade partners have produced little.
Negotiations with Japan seem to have outright collapsed, despite Trump’s claim that “big progress” was being made. On Tuesday, Trump wrote on Truth Social that he had “spoken to Prime Minister of Israel, Bibi Netanyahu, relative to numerous subjects including Trade, Iran, etc. The call went very well — We are on the same side of every issue.”
Netanyahu — who is governing Israel under the shadow of an arrest warrant issued by the International Criminal Court — doesn’t seem to be on the same page as Trump about their respective nations’ trade policies, given that he left White House negotiations earlier this month with no agreement in place.
Dozens of other deals are pending, but the United States’ main economic competitor — China — has issued a warning to other nations cautioning them against “appeasement” towards the Trump administration.
“China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will never accept it and will resolutely take countermeasures,” a spokesperson for the Chinese Commerce Ministry said on Monday.
The Trump administration is currently implementing a 145-percent tariff rate on Chinese goods, which account for around 16 percent of all U.S. imports. China has in turn retaliated with a tariff rate of 125 percent against the United States. The nation has vowed that they will not bow to the “bullying” of the American president, and will keep up the economic war as long as necessary.
Bloomberg reported on Tuesday that Treasury Secretary Scott Bessent said in a closed-door investor summit that he expects the trade standoff with China to de-escalate — but given the past month of bluster, it’s hard to trust anything the Trump administration says about tariffs or the economy.
