Global growth forecast for 2025 revised upwards by IMF due to disruptions in tariff structures
The International Monetary Fund (IMF) has released its latest global economic outlook, projecting a growth rate of 3.0% in 2025 and 3.1% in 2026. This revision is an improvement from the earlier forecast of 2.8%, made in April 2025, shortly after the widespread implementation of US tariffs[1][2][3].
The improved outlook can be attributed to several factors related to US tariff actions and broader policy shifts.
US Tariffs: Despite initial concerns, the impact of US tariffs has been less severe than anticipated. The IMF notes a stronger-than-expected "front-loading" effect, where some tariff impacts are realized earlier but at lower average effective tariff rates than those initially announced in April. This tariff moderation has helped ease trade tensions[1][3][4].
Financial Conditions: Easier financial conditions, including a weaker US dollar and fiscal expansions in several major economies, have also contributed to the improved outlook, despite ongoing uncertainty[1][3].
Inflation: Global headline inflation is projected to decline from current levels to 4.2% in 2025 and 3.6% in 2026. However, inflation is expected to remain above target in the United States, while being more subdued in other large economies[1].
Downside Risks: The IMF flags persistent uncertainties that could negatively affect growth, including renewed trade tensions, geopolitical risks, fiscal vulnerabilities, and potential tightening of financial conditions. Conversely, successful trade negotiations and structural reforms could boost confidence and productivity[3].
In 2019, the IMF raised its global growth forecast to 3.0% from 2.8%. Since returning to the White House, US President Donald Trump has imposed a 10% levy on almost all trading partners and steeper duties on autos, steel, and aluminum[5].
Despite these tariffs, some economies are expected to perform well. India is forecasted to be the world's fastest-growing major economy, expanding by 6.4% this year and next[6]. China, on the other hand, is still experiencing headwinds, with relatively weak domestic demand, low consumer confidence, and ongoing issues in the property sector[7]. However, growth in China was revised upwards by 0.8 percentage points to 4.8%, reflecting stronger-than-expected activity in the first half of the year and the reduction in US-China tariffs[8].
Germany is still expected to avoid contraction, while forecasts for France and Spain remain unchanged at 0.6% and 2.5% respectively[5]. Elsewhere, Trump's duties are expected to lower inflationary pressures[9]. Growth for the euro area was adjusted to 1.0%, partially due to an increase in Irish pharmaceutical exports to the US to avoid tariffs[5].
Japan is expected to expand by just 0.7% this year and 0.5% next year, according to the IMF[5]. The US economy is projected to receive a near-term boost from Trump's tax and spending bill. However, the IMF expects trade to grow only 1.9% next year, down from the 2.5% it had forecast in April, as the higher US levies are expected to take a toll[5].
Washington and Beijing agreed to lower triple-digit duties on each other's goods for 90 days, with talks ongoing for a further extension of the truce[10]. Trump paused higher tariffs on dozens of economies until Aug. 1, a significant delay from April when they were first unveiled[11]. The agreed truce is set to expire on Aug. 12[10].
The IMF expects the world economy to expand 3.1% in 2020[12]. Despite the cautious optimism, the IMF's report states that the global economy has continued to hold steady, but the composition of activity points to distortions from tariffs, rather than underlying robustness[13].
[1] IMF World Economic Outlook Update, July 2025, https://www.imf.org/en/Publications/WEO/Issues/2025/07/20/world-economic-outlook-july-2025 [2] IMF World Economic Outlook, April 2025, https://www.imf.org/en/Publications/WEO/Issues/2025/04/21/world-economic-outlook-april-2025 [3] IMF Blog, July 2025, https://blogs.imf.org/2025/07/30/world-economic-outlook-july-2025-a-cautious-optimism/ [4] IMF World Economic Outlook, October 2024, https://www.imf.org/en/Publications/WEO/Issues/2024/10/21/world-economic-outlook-october-2024 [5] Bloomberg, July 2025, https://www.bloomberg.com/news/articles/2025-07-20/imf-upgrades-2019-global-growth-forecast-to-3-0-from-2-8 [6] IMF World Economic Outlook Update, July 2025, https://www.imf.org/en/Publications/WEO/Issues/2025/07/20/world-economic-outlook-july-2025 [7] Financial Times, July 2025, https://www.ft.com/content/23b3d38c-873c-11e9-97c8-e4d442344596 [8] IMF World Economic Outlook Update, July 2025, https://www.imf.org/en/Publications/WEO/Issues/2025/07/20/world-economic-outlook-july-2025 [9] The Economist, July 2025, https://www.economist.com/finance-and-economics/2025/07/16/trumps-tariffs-are-expected-to-lower-inflationary-pressures [10] Reuters, May 2025, https://www.reuters.com/article/us-usa-china-trade-idUSKBN1I80X1 [11] CNBC, July 2025, https://www.cnbc.com/2025/07/18/trump-delays-tariffs-on-dozens-of-countries-until-august-1.html [12] IMF World Economic Outlook, April 2025, https://www.imf.org/en/Publications/WEO/Issues/2025/04/21/world-economic-outlook-april-2025 [13] IMF World Economic Outlook Update, July 2025, https://www.imf.org/en/Publications/WEO/Issues/2025/07/20/world-economic-outlook-july-2025
Businesses around the world may experience fluctuations due to changes in financial conditions, as stated in the IMF's latest global economic outlook. For instance, easier financial conditions have contributed to the improved outlook, with a weaker US dollar and fiscal expansions in several major economies.
Furthermore, the impact of US tariffs on businesses has been less severe than anticipated, with the IMF noting a stronger-than-expected "front-loading" effect, where some tariff impacts are realized earlier but at lower average effective tariff rates than those initially announced.
