The IMF warns Trump’s spiralling tariff war and erratic policies are dragging the United States and global economies toward crisis, with 2025 growth plummeting and inflation surging

The Trump trade war economy is facing a major blow, as a new report from the International Monetary Fund warns that Trump’s escalating tariffs are damaging global growth and pushing the U.S. economy toward serious risk.

The IMF’s latest World Economic Outlook paints a grim picture. Global growth, which stood at 3.3% last year, will now shrink to a fragile 2.8% in 2025. The United States, long the engine of global commerce, finds itself stalling, with growth plummeting from 2.8% in 2024 to a projected 1.8% this year. The fund laid the blame squarely at Trump’s feet.

In a sharp warning, the IMF explained that Trump’s sudden and sweeping tariffs, unleashed in early April, have driven the average US import tax to a level not seen in over 100 years. This historic move, coupled with retaliation from America’s trading partners, has plunged the global economy into chaos.

Pierre-Olivier Gourinchas, the IMF’s chief economist, minced no words. “We’re entering a new era,” he said. “The global economic system that has operated for 80 years is being reset — and not for the better.”

The IMF revealed that Trump’s trade decisions alone accounted for nearly half of the downgrade to the US growth forecast. Even before the tariffs took full effect, policy uncertainty had already begun choking consumer demand and freezing corporate investment.

Now, markets reflect the mounting fear. The Fear & Greed Index has sunk to 24 — a stark sign of extreme fear gripping investors. The Dow tumbled over 2.5%, the NASDAQ slid by 2.7%, and analysts across the globe warn of deeper damage ahead.

Beyond growth, inflation remains another lurking menace. The IMF has revised its US inflation estimate from 2% to 3%, with many economists predicting even higher spikes as tariffs raise the price of goods across the board. Trump, however, shows no signs of retreat. He continues to insist that other nations have “ripped off” the United States, justifying his radical reset of global trade norms.

Even central banks are not immune to the pressure. Trump recently lashed out at Federal Reserve Chair Jerome Powell, branding him a “major loser” in an effort to force rate cuts. The IMF responded sharply, reaffirming that “central bank independence remains a cornerstone” of stable governance.

At the Port of Baltimore and docks from Shenzhen to Hamburg, the physical impact of the trade war is also evident. Containers stack higher as goods remain trapped in limbo, unable to move through strained supply chains, their value eroding with each passing day.

European Central Bank President Christine Lagarde echoed the IMF’s concerns. “Free trade has always supported growth,” she told CNBC. “These tariffs are the opposite of progress. Europe will suffer. Everyone will suffer.”

While Trump frames his tariffs as a patriotic defence, the IMF sees only destruction. “The long-term impact of tariffs, if sustained, will be negative for all regions,” said Gourinchas. That includes North America.

The IMF’s report, thrown into disarray after Trump’s abrupt policy shift on 2 April, warns that “risks are firmly tilted to the downside.” Without de-escalation and clarity, they say, further contraction is inevitable.

Tuesday’s news arrives as tensions mount on every front — politically, economically, and globally. From Maryland to Mumbai, uncertainty reigns. What was once a trade dispute has now metastasised into a worldwide economic reckoning. And as the numbers slide and inflation climbs, the world braces itself — not just for the slowdown, but for a seismic economic collapse, forged in Washington and felt everywhere.