Even among some of the world’s leading economic thinkers, confident predictions are currently hard to come by, according to the International Monetary Fund ( IMF)’s ( IMF) just released its World Economic Outlook.
A fortnight of seminars, presentations, and press events focusing on the worldwide economy, foreign growth, and world financial markets are held each flower in Washington, DC. The IMF releases its global economic growth prediction at both the flower discussions and the annual meetings, which are held each fall.
The IMF has released a foundation estimates and an clause analyzing the tax events that occurred between April 9 and April 14 for its spring meeting in 2025. According to the fund’s report, world GDP will grow by 2.8 % in 2025 and 3.0 % in 2026. For the euro area, growth will be 0.8 % and 1.2 % for 2025 and 2026 respectively.
These projections are significantly revised from IMF data that was released just three months ago. Growth in the euro area is down 0.2 % compared to the fund’s January update, and growth globally is down by 0.5 %.
We live in a much more ambiguous world than we did three months ago, so understanding the most recent IMF document and its negative estimates is essential.
Trump, taxes, and doubt
The term “unpredictable” may be sufficient if one had to total up the new US tax scheme in one word. The largest price increase in modern history occurred on April 2, 2025, referred to as” Liberation Day.”
The US leader next made two more presentations only one year later. Second, a 90-day ban on tax increases, which he allegedly did in search of bilateral treaties with the nations to which he had applied levies above 10 %. Next, that China would not be subject to this restriction, with the price increases on its goods increasing to 145 %.
This freeze means that until July, EU products that are sold to the US will be subject to a 10 % tariff rather than the 20 % that was announced on April 2. The new US administration’s 10 % application is still significantly higher than the standard tariff of 1.34 % that was in effect before April 5th, though.
But what will the price get after these 90 time? What will happen in December? What will happen in two centuries? What products will not be subject to the exemption? How far will China’s trade war with the US come? Nobody knows the answer to all of these issues. The IMF’s flower forecast for this uncertainty is clear.
Confusion is unstoppable.
The world industry doubt index from the IMF is now seven times higher than it was in October 2024, which is significantly higher than the pandemic.
This uncertainty affects the economy more severely than a large but clear tariff. Companies can at least restructure their manufacturing processes with a price, and customers can look for alternative goods. There is a charge, but at least businesses and consumers can make plans.
No one can determine these expenses now, though, because no one is aware of the impact of tariff changes. A US company might choose to purchase a particular product from the EU immediately assuming the price will be 10 %, but it turns out that the price has increased to 100 % once the product has arrived in the US because a political advisor predicted raising tariffs on that product would benefit the US economy.
Although it may seem incredible, the levies are being decided and put into effect in reality. According to one theory, Peter Navarro, the government’s financial advisor and tax idealist, was in another room at the time, so they were only able to persuade Trump to stop new tax increases.
Silence is ultimately the best course of action for both consumers and businesses because of this volatility.
Anxiety and turbulence
It should come as no surprise that financial markets are so unstable because of these regular plan changes. Financial areas are now experiencing levels of uncertainty and anxiety comparable to those seen during Covid-19, despite Trump’s proudly humblingly praising rising share prices soon after the price freeze was announced.
Five years ago, uncertainty was linked to a rise in the demand for US government bonds as a result of the “flight to health” effect, which forces investors to sell higher-risk investments and purchase safer assets like gold and government bonds in times of doubt.
We are now seeing the exact same. Since” Liberation Day,” the price of US bonds has decreased, which indicates that investors are selling them. In other words, the US government’s bill is no longer viewed as a protected asset. This paradigm shift may lead to even more financial volatility in the future given the impact of the money and US bill on global industry.
Supply stores are suddenly bridging.
One thing shares the recent situation with Covid-19, the next big global economic crisis, with the upheaval of global supply chains. Production was compelled to cease during the pandemic due to confinement. It is the imposition of tariffs as of right now.
There is, nevertheless, a second significant change. People were aware that there would only be so long before vaccines would be accessible and normal would return during Covid. Today, President Trump’s own advisors sell him all kinds of plans to protect US economical interests, hardly any disease, but rather instability in financial markets.
At the Universitat de Barcelona, Sergi Basco is the head of economics.
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