US and global economic outlook deteriorates in Trump trade war, IMF says

Workers assemble the Zeekr EV models at the Chinese automaker Zeekr assembly plant in Ningbo east China's Zhejiang Province Wednesday April AP Photo Andy Wong AP Andy Wong Workers assemble the Zeekr EV models at the Chinese automaker Zeekr assembly plant in Ningbo east China's Zhejiang Province Wednesday April AP Photo Andy Wong AP Andy Wong WASHINGTON AP The U S and global economies will likely slow significantly in the wake of President Donald Trump s tariffs and the uncertainty they have created the International Monetary Fund stated Tuesday The IMF commented that the global market system will grow just this year down from its forecast in January of according to its latest World Economic Outlook And in global development will be the fund predicts also below its previous estimate And the Fund sees the world s two largest economies China and the United States weakening U S economic rise will come in at just this year down sharply from its previous forecast of and a full percentage point below its expansion The IMF doesn t expect a U S recession though it has raised its odds of one this year from to about China is now projected to expand this year and next down roughly half a point from its previous forecasts We are entering a new era Pierre-Olivier Gourinchas chief economist at the IMF declared This global economic system that has operated for the last eighty years is being reset The forecasts underscore the widespread impact of both the tariffs and the uncertainty they have created Every country in the world is affected the IMF commented by hikes in US import taxes that have now lifted average U S duties to about the highest in a century The forecasts are largely in line with countless private-sector economists expectations though specific do fear a recession is increasingly likely Economists at JPMorgan say the chances of a U S recession are now The Federal Reserve has also forecast that increase will weaken this year to The IMF is a -nation lending organization that works to promote economic progress and financial stability and to reduce global poverty Gourinchas stated that the heightened uncertainty around the import taxes led the IMF to take the atypical step of preparing several different scenarios for future increase Its forecasts were finalized April after the Trump administration informed sweeping tariffs on nearly countries along with nearly-universal duties Those duties were paused April for days Gourinchas explained the pause didn t substantially change the IMF s forecasts because the U S and China have imposed such steep tariffs on each other since then The Trump administration has slapped duties on cars steel and aluminum as well as import taxes on the bulk goods from Canada and Mexico The White House has also imposed tariffs on nearly all imports and a huge duty on goods from China though smartphone and computers have been exempted China has retaliated with duties on US goods The uncertainty surrounding the Trump administration s next moves will also likely weigh heavily on the U S and global economies the IMF stated Preponderance traded goods are parts that feed into finished products and the tariffs could disrupt supply chains similar to what occurred during the pandemic Gourinchas warned in a blog post Companies facing uncertain domain access will likely pause in the near term reduce capital and cut spending he wrote The U S tariffs are also expected to hit less-developed nations with Mexico s financial market now expected to shrink this year by down from a previous projection of increase South Africa is forecast to grow just this year down from a projection in January While the U S financial system will likely suffer a supply shock Gourinchas explained China is expected to experience reduced demand as U S purchases of its exports fall Inflation will likely worsen in the United States rising to about by the end of this year while it will be little changed in China the IMF forecast In his blog post Gourinchas acknowleged that there is an acute perception that globalization unfairly displaced various domestic manufacturing jobs and added that there is particular merit to these grievances But he added that the deeper force behind this decline is technological progress and automation not globalization Gourinchas noted that both Germany which has a goods exchange surplus and the U S which has a deficit have seen factory output remain relatively level in latest decades even as automation has caused manufacturing employment to decline The IMF expects the tariffs to take a big chunk out of China s financial system but it also forecasts that additional spending by the Chinese governing body will offset much of the hit The European Union is forecast to grow more slowly but the hit from tariffs is not as large in part because it is facing lower U S duties than China In addition particular of the hit from tariffs will be offset by stronger executive spending by Germany The economies of the countries that use the euro are forecast to expand this year and next year down just in both years from the IMF s January forecast Japan s advancement forecast has been marked down to this year and next and lower than in January respectively In a separate analysis Tuesday the IMF warned that global financial stability risks have increased significantly along with the deteriorating economic outlook The fund noted that chosen stock and bond prices remained high despite the modern area rout triggered by Trump s tariffs which means they are vulnerable to further drops The IMF also cautioned that specific financial institutions could come under strain in volatile markets pointing in particular to heavily indebted hedge funds and asset management companies and the menace that they will be forced to raise cash by selling investments into an already-fragile sphere AP Economics Writer Paul Wiseman contributed to this summary Source