IMF Warns of Slowing Global Growth Amid Trump Tariffs and Policy Uncertainty

The International Monetary Fund (IMF) has cut its global growth forecasts. It now sees a distinctly threatened world economy as a result of U.S. President Donald Trump's recent trade policy decisions and the uncertainty they are creating around the globe. In its latest World Economic Outlook published in April 2025, the IMF projected that world growth would be 2.8% in 2025, down 0.5 percentage points from the same organization's estimate made just three months earlier. The growth forecast for 2026 has also been lowered a bit, now set at 3.0%.

This downward revision follows a broad tariff policy introduced by the United States on April 2, which effectively slaps universal duties on imports. In the wake of this, the global financial world has grown even more anxious, with not a few policymakers and analysts now fretting over the apparent disintegration of the post-World War II economic order.

India’s Resilience Tested but Growth Outlook Dips

India is still on track for relatively notable growth compared to other countries, but it was not immune to the IMF's latest round of downgrades. The country's gross domestic product growth is now projected at 6.2% for the fiscal year that ends in March 2026, which is down by 0.3 percentage points from where the IMF had previously pegged it in January. And the IMF sees this moderation basically flowing from two areas: trade disruptions and overarching global uncertainty.

As India moves forward, it is expected that the growth rate will nudge up slightly to 6.3% in the next fiscal year. Also, inflation is likely to remain in comfortable territory, with the Consumer Price Index projected to be up 4.2% in FY26 and 4.1% in FY27. These are the sort of stable fundamentals that should underpin investor confidence. But even so, the unfolding global situation may continue to exert some pressure on India’s external sector.

Global Economic Risks Climb Sharply

The IMF has some alarming news: the chances of a global downturn are rising. The Fund isn't formally calling for a recession, but it's now estimating a 30% chance that the world will experience something similar in 2025. That's nearly double the 17% risk it assessed earlier this year. What seems to be driving this increase is a combination of the sheer size of the policy shifts and how uncertain we're all now feeling about what will happen next.

The IMF stressed that although growth is still above levels that would ordinarily result in a recession, the current path we're on is fraught with risks. Inflation, which had seemed to be heading decisively downward, is now being marked up, and across the world, the process of getting inflation to settle down in a more normal range seems to be stalling.

Tariffs Trigger Retaliation and Broader Disruptions

The trade conflict has already pushed retaliation to a blistering pace. China, contending with U.S. tariffs that are hitting some goods at levels as high as 245%, has struck back, levying its own steep counter-tariffs that hit 125% on a number of American goods. And it's not just China that's getting squeezed; other parts of the world, including the Euro area, are caught in the crossfire. Multiple European companies are watching their business hit walls that are only going to get higher as trade relations deteriorate.

The IMF is cautioning that the recalibration of the capital markets and the shifting around of the flows of capital have the potential to create some very choppy waters for several countries, especially those that have a high level of debt and are designated as emerging economies. In the Fund's concluding remarks, it urged countries around the globe to work together in a renewed spirit of international cooperation to avoid those types of reforms that retreat from the global trading system.