EXECUTIVE SUMMARY

Following an unprecedented series of shocks in Figure ES.1. US Effective Tariff Rates on All Imports
the preceding years, global growth was stable yet (Percent)
underwhelming through 2024 and was projected to
60
remain so in the January 2025 World Economic Outlook Tariff of Abominations (1828)
(WEO) Update. However, the landscape has changed 50
Morrill tariff (1861)
as governments around the world reorder policy
priorities. Since the release of the January 2025 WEO 40
Update, a series of new tariff measures by the United
States and countermeasures by its trading partners 30
April 9 tariffs
have been announced and implemented, ending up Smoot-Hawley
(1930) April 2 tariffs
in near-universal US tariffs on April 2 and bringing 20
effective tariff rates to levels not seen in a century
10 Jan. 20–Apr. 1
(Figure ES.1). This on its own is a major negative 2025 tariffs
shock to growth. The unpredictability with which GATT (1947)
0
these measures have been unfolding also has a negative 1821 41 61 81 1901 21 41 61 81 2001 25
impact on economic activity and the outlook and, at
the same time, makes it more difficult than usual to Sources: US Bureau of the Census, Historical Statistics of the United States, 1789–1945;
US International Trade Commission; and IMF staff calculations.
make assumptions that would constitute a basis for an Note: The Jan. 20–Apr. 1 tariffs in 2025 include 20 percent tariffs on China; 25 percent
internally consistent and timely set of projections. tariffs on steel and aluminum; 25 percent tariffs on Mexico and Canada; and a
Given the complexity and fluidity of the current 10 percent tariff on Canadian energy imports. A United States–Mexico–Canada
Agreement (USMCA) carve-out is assumed to halve the effective tariff increase for
moment, this report presents a “reference forecast” Canada and Mexico. The April 2 tariffs include auto sector tariffs and country-specific
based on information available as of April 4, 2025 tariffs, applying exemptions provided in Annex II of the Executive Order per IMF
staff judgment. The April 9 tariffs include an increase in the tariffs on China to 145
(including the April 2 tariffs and initial responses), in percent and a reduction in other country-specific tariffs to 10 percent. It also includes
lieu of the usual baseline. This is complemented with exemptions on some electronic products announced on April 11. GATT = General
Agreement on Tariffs and Trade.
a range of global growth forecasts, primarily under
different trade policy assumptions.
The swift escalation of trade tensions and extremely
high levels of policy uncertainty are expected to have a the euro area at 0.8 percent is expected to slow by
significant impact on global economic activity. Under 0.2 percentage point. In emerging market and devel-
the reference forecast that incorporates information oping economies, growth is expected to slow down
as of April 4, global growth is projected to drop to to 3.7 percent in 2025 and 3.9 percent in 2026, with
2.8 percent in 2025 and 3 percent in 2026—down significant downgrades for countries affected most by
from 3.3 percent for both years in the January 2025 recent trade measures, such as China. Global headline
WEO Update, corresponding to a cumulative down- inflation is expected to decline at a pace that is slightly
grade of 0.8 percentage point, and much below the slower than what was expected in January, reaching
historical (2000–19) average of 3.7 percent. 4.3 percent in 2025 and 3.6 percent in 2026, with
In the reference forecast, growth in advanced econ- notable upward revisions for advanced economies and
omies is projected to be 1.4 percent in 2025. Growth slight downward revisions for emerging market and
in the United States is expected to slow to 1.8 percent, developing economies in 2025.
a pace that is 0.9 percentage point lower relative to Intensifying downside risks dominate the outlook.
the projection in the January 2025 WEO Update, on Ratcheting up a trade war, along with even more
account of greater policy uncertainty, trade tensions, elevated trade policy uncertainty, could further reduce
and softer demand momentum, whereas growth in near- and long-term growth, while eroded policy

International Monetary Fund | April 2025 xv

buffers weaken resilience to future shocks. Divergent the same time, they should address domestic policy
and rapidly shifting policy stances or deteriorating and structural imbalances, thereby ensuring their
sentiment could trigger additional repricing of assets internal economic stability. This will help rebalance
beyond what took place after the announcement of growth-inflation trade-offs, rebuild buffers, and
sweeping US tariffs on April 2 and sharp adjustments reinvigorate medium-term growth prospects, as well
in foreign exchange rates and capital flows, especially as reduce global imbalances. The priority for central
for economies already facing debt distress. Broader banks remains fine-tuning monetary policy stances to
financial instability may ensue, including damage to achieve their mandates and ensure price and financial
the international monetary system. Demographic shifts stability in an environment with even more difficult
and a shrinking foreign labor force may curb potential trade-offs. Mitigating disruptive foreign exchange
growth and threaten fiscal sustainability. The lingering volatility may require targeted interventions, as
effects of the recent cost-of-living crisis, coupled with outlined in the IMF’s Integrated Policy Framework.
depleted policy space and dim medium-term growth Macroprudential tools should be activated as needed to
prospects, could reignite social unrest. The resilience contain the buildup of vulnerabilities and to provide
shown by many large emerging market economies may support in case of stress events. Restoring fiscal space
be tested as servicing high debt levels becomes more and putting public debt on a sustainable path remain
challenging in unfavorable global financial conditions. an important priority, while meeting critical spend-
More limited international development assistance may ing needs to ensure national and economic security.
increase the pressure on low-income countries, pushing This requires credible medium-term fiscal consolida-
them deeper into debt or necessitating significant fiscal tion plans. Structural reforms in labor, product, and
adjustments, with immediate consequences for growth financial markets would complement efforts to reduce
and living standards. On the upside, a deescalation debt and narrow cross-country disparities. As Chap-
from current tariff rates and new agreements providing ter 2 explains, countries’ age structures are evolving
clarity and stability in trade policies could lift global at different rates, with important consequences for
growth. medium-term growth and external imbalances. In
The path forward demands clarity and coordination. addition, as Chapter 3 documents, migration policy
Countries should work constructively to promote a shifts in destination countries have sizable spillover
stable and predictable trade environment, facilitate effects, disproportionately affecting emerging market
debt restructuring, and address shared challenges. At and developing economies.

xvi International Monetary Fund | April 2025