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The International Monetary Fund now predicts that global economic growth will experience a "significant slowdown" in 2025 as President Trump attempts to reshape global trade with tariffs.

The IMF expects US growth to drop nearly a full percentage point lower than pre-tariff estimates, to 1.8%, due to greater policy uncertainty, trade tensions, and the expectation for lower consumer spending.

Tariffs are also expected to weigh on US growth in 2026, which is now projected to be 1.7%.

Globally IMF estimates that a half percentage point will be shaved off economic growth, falling to 2.8% from a prior estimate of 3.3, before recovering to 3% in 2026. Global trade growth is forecast to slow to 1.7% from a rate of 3.8% in 2024.

The IMF in its new World Economic Outlook released Tuesday called Trump’s April 2 "reciprocal" tariffs announcement "a major negative shock," noting that "the global economy is at a critical juncture” and that "tariffs and uncertainty will lead to a significant slowdown in global growth in the near term."

Trump has paused many of those reciprocal tariffs for 90 days while his administration tries to strike deals with the countries affected, but other tariffs imposed earlier remain in effect.

“Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near- and long-term growth, while eroded policy buffers weaken resilience to future shocks,” the IMF warned in its report.

The IMF also expects inflation to rise in the US as a result of tariffs, to 4%. It expects prices to rise in other developed economies, too, even as worldwide inflation drops.

And it warned that where inflation risks are higher or inflation expectations are rising, central banks should base any future interest rate cuts on evidence that inflation is heading decisively back down to ensure inflation expectations remain anchored.

The idea is to guard against the risk of prematurely cutting rates, only to follow later with rate hikes.

“Central banks need to be particularly vigilant regarding those risks after the recent period of prolonged inflation and should be ready to act forcefully," according to the IMF report, "because inflation expectations may be much less stable in instances of renewed inflationary pressures.”

Trump is pressuring Federal Reserve Chairman Jerome Powell to cut rates in the US as a way of avoiding a slowdown, arguing that inflation is receding, and is growing frustrated with a lack of action. The president has openly mused about firing the central bank policymaker, something Powell has argued is not permitted by law.

The US is not the only part of the world that will see economic pullbacks this year, according to the IMF.

The outlook for growth in China, the prime target for the US in its trade war, is now expected to slide to 4%, down from an estimated 4.6% in January. The IMF also revised down its outlook for growth in China for next year to 4% from an estimated 4.5>#/p###

Growth in the Euro area is also expected to decline slightly to 0.8 percent in 2025, before picking up modestly to 1.2 percent in 2026.

Overall, the IMF said risks to the economic outlook are tilted to the downside, in both the short and the medium term.

Among those risks, a trade war could fuel higher inflation through rising import prices at a time when inflation expectations have risen. If uncertainty remains high for long, firms may also delay investment projects with a consequent reduction in global investment.

The IMF estimates trade uncertainty the last time around that Trump was president reduced US investment by approximately 1.5 percent in 2018.

“Countries should work constructively to urgently resolve trade tensions and promote clear and transparent trade policies to stabilize expectations, avoid investment distortions, and reduce volatility while avoiding steps that could further harm the world economy,” said the IMF.