IMF cuts Canada’s 2025 growth forecast to 1.4 percent after US imposes sweeping new tariffs
The International Monetary Fund (IMF) has downgraded Canada’s economic growth outlook, citing the impact of tariffs imposed by the United States and increased geopolitical tension.
According to Financial Post, Canada’s gross domestic product is now expected to grow by 1.4 percent in 2025 and 1.6 percent in 2026.
This represents downward revisions of 0.6 and 0.4 percentage points respectively from the IMF’s January World Economic Outlook, which had projected 2 percent growth in both years.
The report attributed Canada’s “slumping fortunes” to “new tariffs on exports to the United States that came into effect in March,” and broader uncertainty.
On March 4, tariffs of 25 percent on non-energy goods and 10 percent on energy goods were applied to Canadian exports.
While goods covered under the Canada-United States-Mexico Agreement were exempt, Financial Post reported that Canada retaliated with tariffs on US$60bn worth of US goods.
The IMF’s latest update was compiled just 10 days after US President Donald Trump announced widespread tariff measures.
These forecasts, described by the IMF as “reference forecasts” based on developments as of April 4, underscore how quickly policy actions are impacting economic projections.
Reuters quoted IMF chief economist Pierre-Olivier Gourinchas saying, “We are entering a new era as the global economic system that has operated for the last 80 years is being reset.”
The global economic outlook has been revised accordingly. Reuters reported that the IMF cut its global growth forecast by 0.5 percentage point to 2.8 percent for 2025 and by 0.3 percentage point to 3 percent for 2026.
These were previously estimated at 3.3 percent in January. Medium-term growth prospects also remained below historical norms, with a five-year forecast stuck at 3.2 percent, below the 2000–2019 average of 3.7 percent.
Inflation is now projected to decline more slowly due to the tariff effect.
Global inflation is expected to reach 4.3 percent in 2025 and 3.6 percent in 2026, with “notable” upward revisions for the United States and other advanced economies.
Gourinchas noted that the Federal Reserve would need to remain vigilant as inflation in the US is forecast to hit 3 percent in 2025, up one percentage point from January.
The IMF also cut its US growth forecast to 1.8 percent in 2025 and 1.7 percent in 2026, down 0.9 and 0.4 percentage points respectively.
Gourinchas told Reuters that although a recession is not expected, the odds of a US downturn have increased from 25 percent to 37 percent.
He added that concerns around central bank independence have intensified following President Trump’s attacks on Federal Reserve Chair Jerome Powell.
Mexico, also subject to US tariffs, was forecast by the IMF to experience a sharp contraction in 2025. Growth is now projected at -0.3 percent, a 1.7 percentage point decline from January’s estimate, before rebounding to 1.4 percent in 2026.
The broader consequences of rising trade tensions were also reflected in the IMF’s lowered forecast for global trade. Reuters noted that growth in global trade is expected to fall by 1.5 percentage points to 1.7 percent in 2025, which is half the growth rate seen in 2024.
According to Gourinchas, the steep tariffs imposed between the US and China are expected to sharply reduce bilateral trade and weigh down global trade growth.
In Asia, the IMF downgraded China’s growth outlook to 4 percent for both 2025 and 2026, due to weaker exports but partially offset by fiscal measures.
In Europe, growth in the euro area is forecast to slow to 0.8 percent in 2025 and 1.2 percent in 2026, with Spain as the only major economy showing an upward revision.
Germany and the UK saw their projections reduced, with the UK’s growth revised to 1.1 percent in 2025 due to recent tariff announcements and weaker consumer spending.
The IMF concluded that the global trading environment remains less predictable and more costly.
Gourinchas emphasized, “Restoring predictability, clarity to the trading system in whatever form is absolutely critical.”
