IMF declares world economic order experiencing huge ‘reset’
(MENAFN) The International Monetary Fund (IMF) has revised its global economic forecast downward, warning that the world economy is entering a period of major structural change driven by escalating trade tensions and policy shifts from the United States.
In its latest World Economic Outlook released Tuesday, the IMF stated that the global economy is now undergoing a "reset" of the system that has governed international trade for the past eight decades. The report forecasts a slowdown in global growth to 2.8% in 2025, a drop from 3.3% in 2024. The outlook had previously expected stable growth for the upcoming year.
Pierre-Olivier Gourinchas, the IMF’s chief economist, noted that the rules underpinning the global economic order are being disrupted, while new frameworks have yet to emerge. He cautioned that the uncertainty caused by sudden tariff hikes and shifting policies could further dampen growth.
The IMF significantly lowered its US growth projection for 2025 to 1.8%, down from 2.8% last year. It also forecast slower growth for major US trading partners such as Canada, Mexico, and China. China’s growth is expected to fall to 4% this year due to efforts to cushion the impact of Washington’s tariffs, while EU nations are also predicted to see economic slowdowns.
Since returning to office in January, President Donald Trump has introduced aggressive trade measures, including what he dubbed "Liberation Day" tariffs on April 2. These new tariffs, the IMF said, are the highest seen since the Great Depression. Trump has implemented a universal 10% tariff on nearly all imports and slapped at least 145% duties on Chinese products. He also introduced “reciprocal” tariffs targeting countries accused of unfair trade practices.
Although the new tariffs have been temporarily paused until July to allow time for negotiating bilateral trade deals, Trump has warned they could be reinstated or raised if retaliation occurs. The resulting trade uncertainty has already had a destabilizing effect on global markets.
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