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The United States faced an increased risk of recession when President Donald Trump’s trade war pushes the world economy to a “significant slowdown”, warned the IMF, with the first economist of the fund defending the federal interest rate reserve policy.
In its latest global economic perspectives, the fund has made it possible to unravel almost a percentage point of its growth forecasts for the United States this year and has lowered its prospects for all other G7 nations, as well as significant economies such as China, India, Brazil and South Africa.
Countries were to “resolve their trade in urgently” to avoid other damage to growth prospects, the fund said. “If sustained, this brutal increase in prices and the uncertainty of participants will considerably slow down global growth.”
The warning came while the IMF has published its global financial stability report separately, which revealed that the risks for the markets had “considerably increased” since the price change of the White House, with a sale in shares and an American government debt contributing to a “tightening of financial conditions”.
Tobias Adrian, director of the monetary department and the capital markets of the IMF, told Financial Times that although the pricing policy “disadvantages” has been “evaluated to a certain extent”, the equity prices could “absolutely” fall more if the negotiations between the United States and its largest business partners are traveling.
The sale resumed on Monday, bringing the dollar lower on the fears that Trump seeks to withdraw the president of the American federal reserve Jay Powell from his post – threatening the independence of the Fed – while the president calls for immediate rate reductions.
Pierre-Olivier Gourinchas, the chief economist of the IMF, said that the central forecasts of the fund was that the American and global economies would avoid recession this year, after entering 2025 with a firm dynamic. But the probability of a recession in the United States has increased to almost 40%, said Gourinchas, compared to 25% in its previous global economic perspectives.
“The major risk before us is that there could be an additional escalation in prices and trade tensions,” he said in an interview. “There is also the risk of tightening the financial conditions they have done.”
Prices will also feed higher inflation in the United States, according to the IMF, consumer prices which should increase by 3% this year, a full percentage point higher than expected.
Returning the fund’s argument that the central bank independence is important to keep inflation under control, Gourinchas said that the Fed was right to keep interest rates waiting because it has weighed the impact of levies. The IMF’s prospects assume that there will be two Fed rate drops this year.
Gourinchas added that additional commercial barriers represented a tender shock which could “significantly” the prices of goods in the coming years.
“The Fed is sitting at this stage and says:” Ok, how will it be played? “” He said. “And waiting and understanding things seems very appropriate.”
The prospects are involved as economic decision -makers around the world meet in Washington for the IMF / World Bank spring meetings, which will be dominated by the discussion of global trade conflicts.
The IMF has reduced its prospects for global growth by half a point to 2.8% this year and reduced its prediction for 2026 to 3%. This is a slowdown compared to the rate of 2024 of 3.3%, because the IMF warns the “major negative shock” of the increase in commercial barriers.
The forecasts incorporated the announcements and countermeasures of the American prices by other countries between February 1 and April 4-before Trump announces a 90-day break on most of his so-called reciprocal rates, while increasing those of China. Among the countries of the G20, only Turkey, Argentina and Russia have experienced growth improvements.
The fund reduced its growth forecasts for the United States to 1.8% in 2025, against its previous forecast of 2.7% – and 1.7% in 2026. This always leaves the country as the G7 economy with the fastest growth this year and next year, but it is strongly below the American expansion of 2.8% of America in 2024.
“Lower risk intensification dominates the prospects,” said the fund. “Larger financial instability can follow, including damage to the international monetary system.”
Growth in Germany is now expected at zero this year, with an expansion of only 0.9% in 2026, while the United Kingdom is planned for 1.1% this year and 1.4%.
China is also planned for a slowdown, the IMF predicting the expansion of 4% this year and the next, against 5% in 2024.
The IMF has described alternatives to its main “reference” scenario for the global economy.
But while such an alternative incorporates the 90-day break from most so-called Trump’s reciprocal rates, the fund concluded that, even if the tasks were delayed indefinitely, it would not “change” the prospects set out in its reference forecast.
This is due to the scale of trade barriers currently erected between the United States and China, the two largest economies in the world.
The negative impact of obstacles would not be limited to the short term, added the fund. It expects the prices to decrease competition and innovation in the longer term while increasing the search for rents, “weighing more on prospects”.
He added: “The growth prospects could however improve immediately if the countries soothe their current position of commercial policy and forge new trade agreements.”
