Threats to global economic growth are rising, as the trade shock caused by the United States destroys confidence and crashes financial markets. This is stated in a Financial Times study prepared ahead of key meetings of economic policymakers in Washington this week, writes UNN.
Details
Confidence indicators, as stated, have fallen sharply, and conditions in financial markets have worsened, according to the Brookings-FT Tracking Indices for the Global Economic Recovery, called "Tiger". The worsening global outlook is a marked contrast to the relatively resilient start to the year.
Senior fellow at the Brookings Institution Eswar Prasad said it would be "premature" to forecast a global recession, but warned that the breakdown of global trade and rising political uncertainty would significantly dampen growth.
"We have witnessed this huge shock. Every open economy that relies on trade will be squeezed, and on top of that, you will have negative effects on confidence," Prasad said.
These findings were made as economic policymakers and finance ministers from around the world gathered in Washington for the first series of IMF and World Bank spring meetings since Donald Trump's inauguration as US President.
IMF Managing Director Kristalina Georgieva warned that the fund was preparing to cut growth forecasts, as "financial market volatility is rising" and "uncertainty in trade policy is literally off the charts."
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In January, the fund predicted global growth of 3.3% this year and next, with the US expected to grow by 2.7% this year and 2.1% in 2026.
Trump's decision on April 2 to announce massive tariffs on most of America's trading partners caused a sharp fall in financial markets and a series of downgrades to growth forecasts.
The European Central Bank on Thursday lowered its key interest rate to 2.25%, preparing for the consequences of trade wars, warning that the growth outlook had worsened due to "rising trade tensions."
The Tiger Indices, published twice a year, compare real activity, financial markets, and confidence indicators with their historical averages for both advanced and developing economies.
Particularly striking are the confidence indicators in the US, showing the lowest level of confidence since the index's inception, as well as a sharp deterioration in financial market conditions, the publication writes. Confidence levels in China and Germany also remained low.
According to the report, real activity indicators in the US remain relatively high, but they are based on data up to January 2025, and therefore precede the introduction of Trump's trade policy.
Some signs continue to point to activity among US companies: retail sales jumped 1.4% in March, although this could have been partly driven by a surge in car sales as consumers sought to get ahead of tariffs.
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"Uncertainty has severely undermined consumer confidence and is likely to negatively impact business investment and employment growth," Prasad said.
The updated IMF growth forecasts will be published on Tuesday. Private sector economists are lowering growth forecasts due to high political uncertainty, weakening sentiment, and falling markets, which has negatively affected public welfare, the publication notes.
Addition
Trump's global trade war is causing stock declines, especially for technology companies. Nvidia expects a loss of $5.5 billion, and airlines are preparing for an uncertain summer season.