IMF Warns of New Economic Era Amid Rising Trade Tensions
Global Economy Faces Series of Shocks and Growing Uncertainties
In a press conference held on Tuesday, April 22, the International Monetary Fund (IMF) presented its latest growth forecasts and assessment of the global economy, highlighting a shift towards a new economic era. Pierre-Olivier Gourinchas, Chief Economist and Director of the IMF's Research Department, painted a concerning picture: since late January, the global economy has been facing a series of trade shocks and growing uncertainties.
Trade Tensions Disrupt Global Trade
According to the IMF, the successive announcements of tariff hikes, culminating on April 2 with nearly universal tariffs imposed by the United States and responses from certain trading partners, are disrupting global trade. The effective tariff rate in the United States has now surpassed levels reached over a century ago, while tariffs on American exports have also increased.
Global Growth Remains Above Recession Thresholds, but Regions Feel the Pain
Despite global growth remaining above recession thresholds, all regions will experience negative impacts this year and continue to feel the effects next year. The disinflation process is ongoing, but slowing down: global inflation is revised upwards by 0.1% for 2024 and 2025.
Global Trade Growth to Take a Hit
The IMF projects that global trade growth will be severely penalized, dropping from 3.8% in 2023 to just 1.7% this year. The effects of tariffs will vary by country. In the United States, these measures represent a supply shock that will durably weaken productivity and production, while temporarily exacerbating inflationary pressures. American growth is revised downwards by 0.9 percentage points, to 1.8%, with 0.4 percentage points directly attributable to tariffs. Inflation is revised upwards.
Tariffs Have Different Effects on US Trading Partners
For the United States' trading partners, tariffs act as an external demand shock, slowing down activity and compressing prices, although some countries may benefit from redirections of trade flows.
