ADVERTISEMENTThe IMF said that the global economy will grow just 2.8% this year, down from its forecast in January of 3.3%, according to its latest World Economic Outlook. And in 2026, global growth will be 3%, the fund predicts, also below its previous 3.3% estimate.
US economic growth will come in at just 1.8% this year, down sharply from its previous forecast of 2.7% and a full percentage point below its 2024 expansion. The IMF doesn’t expect a US recession, though it has raised its odds of one this year from 25% to 37%.
The forecasts are largely in line with many private-sector economists’ expectations, though some do fear a recession is increasingly likely. Economists at JPMorgan say the chances of a US recession are now 60%. The Federal Reserve has also forecast that growth will weaken this year, to 1.7%.
“We are entering a new era,” Pierre-Olivier Gourinchas, chief economist at the IMF, said. “This global economic system that has operated for the last eighty years is being reset.”
Companies may pull back on investment
The uncertainty surrounding the Trump administration’s next moves will also likely weigh heavily on the US and global economies, the IMF said. Companies may pull back on investment and expansion as they wait to see how the trade policies play out, which can slow growth.
China is also forecast to grow more slowly because of US tariffs. The IMF now expects it will expand 4% this year and next, down roughly half a point from its previous forecasts.
While the US economy will likely suffer a “supply shock,” similar to what hampered during the pandemic and which pushed up inflation in 2021 and 2022, Gourinchas said, China is expected to experience reduced demand as U.S. purchases of its exports fall.
Inflation will likely worsen in the United States, rising to about 3% by the end of this year, while it will be little changed in China, the IMF forecast.
The European Union is forecast to grow more slowly, but the hit from tariffs is not as large, in part because it is facing lower US duties than China. In addition, some of the hit from tariffs will be offset by stronger government spending by Germany.
The economies of the 27 countries that use the euro are forecast to expand 0.8% this year and 1.2% next year, down just 0.2% in both years from the IMF’s January forecast.
Japan’s growth forecast has been marked down to 0.6% this year and next, 0.5% and 0.2% lower than in January, respectively.
Market uncertainty continues
The latest outlook comes as global financial markets have been turned upside down so far this year.
US markets had been on a two-year tear coming into 2025, though many believed that stock prices had become overinflated. Trump’s trade war pushed that sentiment into hyperdrive. The S&P 500 has tumbled more than 12%, and US markets are being outpaced in Europe, Asia, and just about everywhere else.
Trading in traditional “safe havens” like US Treasuries and the dollar has become erratic and unpredictable. At the beginning of the week, the dollar struck a three-year low and US Treasury yields have been soaring. Typically, yields would fall as investors seek a safe place to park their money. US Treasuries no longer appear to provide the shelter they once did.
Only gold, a commodity traded internationally, has maintained its reputation as a safe zone. The price of gold is hitting one record high after another.
ADVERTISEMENTHere’s a round-up of what is happening in various segments of the financial market:
Has the US stock market lost its edge?
US stocks have been losing ground in a sharp reversal after two years of stellar gains.
The S&P 500 index, which is considered a benchmark for the broader market’s health, is down 12.3% in 2025. It gained more than 20% in both 2023 and 2024.
The benchmark index is already in “correction,” having fallen more than 10% from the record it set in February. There have been only five weeks in which it’s ended in positive territory this year and with Monday’s decline, it’s moving closer to bear market territory, or a 20% drop from recent highs.
ADVERTISEMENTIt’s worse on the growth-focused Nasdaq composite, which has plunged nearly 18%.
At the end of trade on Monday, all the three major US indexes were down by more than 2.3%.
Overseas markets have largely performed much better than their US counterparts.
How rising anxiety is hitting US Treasuries
Treasuries, typically considered a less risky area of the market, have been volatile throughout the year.
ADVERTISEMENTThe 10-year Treasury, which influences mortgage rates and other loans, was as high as 4.80% in January but then fell until Trump announced the broad details of his tariff policy in early April. Yields then began to spike this month. The recent jump in bond yields, which happens when bond prices fall, reflects rising anxiety about inflation and a potential recession.
Treasury bonds are essentially debt that the US government takes from the market, and they’re how Washington pays its bills. Bond prices typically move in the opposite direction of stock prices, but prices for both have fallen in tandem. That raises more significant concerns, namely a loss of faith in the US as a safe place to invest.
Is gold the last safe-haven asset?
While traditional ‘safe haven’ assets such as the US dollar and US Treasuries are losing their status as safe investments amidst the current uncertainty, gold is soaring — setting record after record in 2025.
Gold futures rose to more than $3,500 on Tuesday, before they declined a bit. The price is up nearly 27% this year.
ADVERTISEMENTInterest in gold spikes in times of uncertainty as investors seek a safe place for their money, although there can still be some volatility. The price of spot gold fell for three straight trading days following Trump’s sweeping “Liberation Day” announcement on 2 April, for example, but soon rebounded overall.
US dollar battles tariff uncertainty
The US dollar, the world’s reserve currency, is falling under the weight of uncertainty over tariffs, inflation and the direction of the US economy.
The US dollar is down a steep 9% for the year when measured against a basket of other currencies, including the euro, Japanese yen, Canadian Dollar and Swiss franc.
The dollar began to erode almost immediately in 2025, but those losses have accelerated over the past two months. A weakened dollar means it is more difficult for the US government, businesses and consumers to borrow money at lower rates. It also means less purchasing power for US consumers and the potential for stunted economic growth.
ADVERTISEMENTOil prices reflect changing geopolitics
There is good news and bad news about energy prices. The average price for a gallon of gasoline in the US on Monday was $3.15, down sharply from $3.67 at this time last year. That’s the good news.
The bad news is that energy prices fall when people start anticipating an economic slowdown. Factories produce less, families call off vacations and businesses cut travel expenses.
Oil prices hit a four-year low this month, with anxiety over the impact of tariffs on global economic growth sinking in.
West Texas Intermediate crude, the US benchmark, stood at around $64.10 per barrel on Tuesday at midday in Europe. That’s down nearly 14% year to date. And Brent crude, the European standard, was just above $67 — down nearly 13% since the start of 2025.
ADVERTISEMENTEconomists are warning that the steep tariffs Trump is pursuing could cause a recession, which could carry significant implications for the supply chain and jobs in the energy sector.
Bitcoin on a rollercoaster
Bitcoin has continued to undulate.
The world’s largest cryptocurrency has been on a rollercoaster since the start of the year — with the volatile asset climbing to more than $109,000 ahead of Trump’s inauguration in January, only to dip under $75,000 amid wider market sell-offs this month. As of midday Tuesday, bitcoin’s going price was above $88,000, per CoinMarketCap.
That’s more than $6,000 lower than what bitcoin was trading at the start of 2025 — but still significantly higher than in recent years. At this time last year, bitcoin traded around $65,000. And in April 2023, months after the November 2022 collapse of FTX crushed crypto, the digital asset went for under $30,000.
ADVERTISEMENTTrump, once a crypto sceptic, became a major promoter of the industry throughout his campaign — and last month, he signed an executive order establishing a government reserve of bitcoin.