IMF upgrades outlook for global economy, citing less-than-expected
damage from Trump's trade wars
[July 30, 2025] By
PAUL WISEMAN
WASHINGTON (AP) — The International Monetary Fund is upgrading the
economic outlook for the United States and the world this year and next
because President Donald Trump’s protectionist trade policies have so
far proven less damaging than expected.
The IMF now forecasts 3% growth for the global economy this year. That
is down from 3.3% in 2024 but an improvement on the 2.8% it had forecast
for 2025 back in April. The 191-country lender, which works to promote
growth, stabilize the world financial system and reduce poverty, expects
world growth to come in at 3.1% next year, up a tick from the 3% it had
forecast three months ago.
Trump’s decision on April 2 – “Liberation Day,’’ the president called it
-- to impose taxes of 10% or more on U.S. imports from most of the
world’s countries had been expected to be a bigger drag on global
growth.
But the damage was limited, the IMF said, partly because many U.S.
importers scrambled to bring in foreign goods before Trump’s tariffs
took effect and partly because Trump ended up suspending his biggest
levies (including a 145% duty on Chinese goods).

“This modest decline in trade tensions, however fragile, has contributed
to the resilience of the global economy so far,” IMF chief economist
Pierre-Olivier Gourinchas said at a press conference Tuesday. "This
resilience is welcome, but it is also tenuous. While the trade shock
could turn out to be less severe than initially feared, it is still
sizeable, and evidence is mounting that it is hurting the global
economy.''
Tariffs raised $108 billion for the U.S. Treasury from October through
June, nearly double the $55.6 billion they brought during the same
period of the previous fiscal year.
Global growth of around 3% is below pre-pandemic average and the world
economy would be growing faster without Trump’s trade wars.
The IMF modestly upped its forecast for U.S. economic growth to 1.9%
this year and 2% in 2026 when the big tax cuts Trump signed into law
July 4 are expected to provide “a near-term boost.’’
The Chinese economy, the world’s second biggest, is expected to grow
4.8% this year, a hefty upgrade from the 4% the IMF had forecast in
April. China is getting a boost from lower-than-expected U.S. tariffs
and from government spending.
The 20 economies that share the euro currency are collectively expected
to expand 1%, up from the 0.8% the IMF had forecast in April. But a big
chunk of that growth is coming from a surge of pharmaceutical exports
from Ireland, which were timed to beat Trump’s expected tariffs on
drugs.
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 Japan remains in a slow-growth rut
and is expected to eke an expansion of just 0.7% this year and 0.5%
next.
India is once again expected to be the world’s fastest-growing major
economy, expanding a forecast 6.4% this year and next.
Trump has pressured Japan and the European Union to accept 15% U.S.
tariffs on their exports. Indonesia, Vietnam and the Philippines
also agreed to accept stiff U.S. tariffs. More such deals are
expected before Friday when Trump will slap even higher tariffs on
countries that don’t agree make concessions.
Trump’s protectionism is buffeting global commerce. The IMF upgraded
its forecast for growth in world trade, measured by volume, to 2.6%
this year. That is up from the 1.7% it had predicted in April and
reflects a surge in shipments as exporters tried to beat the tariff
crunch. But eventually the higher U.S. levies are expected to take a
toll. The IMF sees trade growing just 1.9% next year, down from the
2.5% it had forecast in April.
Trump has also unsettled financial markets by openly and repeatedly
criticizing Federal Reserve Chair Jerome Powell for the Fed's
reluctance to cut American interest rates. Powell has said that the
central bank must wait to better understands the impact of Trump's
tariffs on inflation.
That same message was delivered last week by the European Central
Bank, which is also holding off on rate calls to measure the impact
of Trump's tariffs.
At the press conference Tuesday, IMF chief economist Gourinchas
spoke up in favor of keeping central banks like the Fed independent
from political pressure. "The evidence is overwhelming that
independent central banks, with a narrow mandate to pursue price and
economic stability, are essential'' to containing inflationary
pressure, he said.
The Fed and other central banks raised rates after inflation flared
up in 2021 and 2022. They managed a so-called soft landing —
bringing inflation down without causing a recession. “That central
banks around the world achieved a successful ‘soft landing’ despite
the recent surge in inflation owes a great deal to their
independence and hard-earned credibility,” Gourinchas said.
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