The IMF just ripped up its forecast—and what's left on the table isn't pretty. Global growth is now projected at just 2.8% in 2025, the slowest pace since COVID. The downgrade, sparked by President Trump's sweeping tariffs, is hitting everywhere: from Washington to Beijing. Effective US tariff rates are now at century-highs. The Fund's chief economist didn't mince words, saying the entire post-WWII global economic system is being “reset.” Meanwhile, the US is expected to grow only 1.8%, with inflation ticking up to 3%. China? Also wounded—growth now seen at 4%. The IMF called it plainly: downside risks dominate, and the worst may not even be priced in.
Markets heard the warning shot—and flinched. The S&P 500 (SPY, Financial) is down 12% since the end of 2024, with investors rotating away from risk as volatility surges. Trump's renewed pressure on the Fed to slash rates has only added fuel to the fire, stirring fears about central bank independence and monetary chaos. Wall Street firms like JPMorgan and Goldman are already flagging higher recession risk. And with global trade volumes now forecast to shrink, capital is flowing to safety, fast.
Behind the scenes, the IMF scrambled to rewrite its outlook in just 10 days—unheard of for an institution that typically takes months to run its models. Why? Trump's April tariff blitz forced a total rework. Even then, Bloomberg economists argue the Fund may still be too optimistic. Historically, the IMF underestimates downturns during shocks like this. For investors, this isn't just another wobble. It's the early innings of something bigger—and potentially more brutal.
