IMF says July forecasts to take into account trade deals, uncertainty

The IMF stated its upcoming global growth forecast in July will consider both positive trade developments, such as tariff reductions between the U.S. and China and a U.S.-Britain trade deal, and negative factors like increased steel and aluminum tariffs. While the World Bank recently downgraded its 2025 global growth forecast due to tariff impacts, the IMF's spokesperson indicated that recent trade-related announcements could potentially support improved economic activity relative to their April forecast, though heightened uncertainty remains as trade negotiations continue.

Analysis

The International Monetary Fund is preparing its July global growth forecast, which will incorporate recent, mixed trade developments. Positive factors under consideration include a significant U.S.-China tariff reduction, an initial U.S.-Britain trade deal, and an April 9 pause on high tariffs, which the IMF suggests could support economic activity relative to its April World Economic Outlook. That April forecast had already revised the 2025 global growth outlook down by half a percentage point to 2.8%. However, the IMF also highlights negative pressures, notably U.S. steel and aluminum tariffs that have reached 50% for all exporters, and emphasizes that the global economic outlook remains subject to 'heightened uncertainty' as trade negotiations continue. This cautious stance is notable when compared to the World Bank's recent decision to cut its 2025 global growth forecast more substantially to 2.3%, citing tariffs and uncertainty as 'significant headwinds.' The IMF acknowledges a 'complex economic landscape,' reflected in first-quarter front-loading activity to preempt tariffs and subsequent trade diversion and unwinding of import activity in the second quarter, with the U.S. 'reciprocal' tariff pause currently set to expire on July 8.

Key Decisions for Investors

• Investors should closely monitor the IMF's updated World Economic Outlook in late July, as it will provide a comprehensive assessment incorporating both the recent positive trade announcements and persistent tariff risks.
• Given the IMF's explicit acknowledgement of 'heightened uncertainty' and a 'complicated picture' for the global economy, maintaining a cautious investment stance and preparing for potential market volatility linked to trade policy is prudent.
• Pay particular attention to developments surrounding the July 8 tariff pause expiration and ongoing trade negotiations, as outcomes could significantly influence global growth trajectories and market sentiment.