A sharp increase in trade tariffs will slow global growth significantly this year and next but the world economy will not slide into recession, the IMF’s chief economist, Pierre-Olivier Gourinchas, said on Tuesday. Gourinchas announced sweeping downgrades to the IMF’s growth forecasts and said world trade growth would be cut in half this year to reflect a “reset” of the global trading system, with US effective tariffs at the highest level for more than a century. The World Economic Outlook includes a “reference forecast,” which reflects policy announcements by the US and trading partners up to April 4, including the April 2 tariffs and initial responses. Under this forecast, global growth will slow to 2.8 per cent this year and 3 per cent next year, a cumulative downgrade of about 0.8 percentage point relative to the IMF’s previous set of projections, in January. “While global growth remains well above recession levels, all regions are negatively impacted,” Gourinchas told a press briefing. He added that the probability of a world recession—that is, global growth falling below 2 percent—had almost doubled, to 30 percent from 17 percent in October. World trade growth will slow from 3.8 per cent last year to 1.7 per cent this year, according to IMF forecasts. Gourinchas called for a stable trading environment that addresses longstanding gaps in international trading rules. “Growth prospects could immediately improve if countries ease from their current trade policy stance, and promote a new, clear, and stable trade environment,” he added.
