WASHINGTON – Global economic activity is expected to decelerate in the upcoming months as US President Donald Trump’s substantial tariffs on nearly all trade partners begin to take effect, the International Monetary Fund reported on Tuesday, as international finance leaders flocked to Washington seeking agreements with Trump’s team to reduce the tariffs.
In fact, the speed of negotiations was swift, White House press secretary Karoline Leavitt remarked, with 18 different nations presenting proposals so far and Trump’s trade negotiation team scheduled to convene with 34 nations this week to deliberate over tariffs. Trump himself shared optimism that a trade agreement with China could “significantly” lower tariffs, buoying market sentiment.
After implementing a base import duty of 10% and even greater charges on dozens of nations earlier this month, Trump suddenly suspended the heightened rates for 90 days, granting countries the opportunity to negotiate more lenient taxes.
The flurry of discussions is taking place following the arrival of hundreds of finance and trade representatives for the spring meetings of the IMF and World Bank Group, almost all aiming to finalize a deal to alleviate the substantial tariff burden imposed by Trump on US goods imports since he began his second term in the White House in January.
With tariffs on imports into the world’s leading economy now at their highest level in a century, the IMF forecasts that global growth in 2025 will decelerate to 2.8% – its weakest performance since the COVID-19 pandemic – down from 3.3% in 2024.
Furthermore, the burden is not solely falling on others: US gross domestic product growth is projected to decline by a full percentage point to merely 1.8% in 2025 from 2.8% in 2024, according to the IMF, with “notable” upward adjustments in inflation as import costs rise.
Another significant casualty of the repercussions is China, with the IMF cutting its growth forecast to 4.0% for this year and the next due to the overwhelming import duties of 145% now imposed on goods imported to the US from the world’s largest goods manufacturer.
In retaliation, China has enacted its own 125% tariffs on American products, resulting in what effectively resembles a trade blockade between the two largest economies, a deadlock that US Treasury Secretary Scott Bessent mentioned is not sustainable.
As per an individual who attended Bessent’s closed-door briefing on Tuesday aimed at investors at a JP Morgan conference in Washington, Bessent holds the view that there will be a de-escalation of US-China trade tensions but described forthcoming negotiations with Beijing as a “struggle” that has yet to commence.
TRUMP ON CHINA
Later on Tuesday, Trump expressed confidence that progress would be made with China that would significantly reduce tariffs on their imports but also cautioned, “if they don’t reach a deal, we will set the deal ourselves.”
Trump asserted that an agreement would yield “considerably” lower tariffs on Chinese products.
“It won’t be that high,” Trump noted when questioned about the current rates. “It won’t be close to that.”
He further stated that “it won’t be zero.”
US stocks soared in after-hours trading following Trump’s statements, with Amazon and Nvidia climbing 3% each and Apple increasing by 2%.
While discussions with China have been slow to commence, Bessent and other members of Trump’s trade team have continued to engage with other crucial trade partners, although specifics are limited and no solid agreements have been finalized thus far.
The US and Japan, for instance, are edging closer to a provisional trade arrangement, a source familiar with the situation informed Reuters, but many of the most significant issues are being deferred. Such a temporary framework will not address the most challenging topics in their trade relationship, and it remains possible that no ultimate agreement could be established, the source stated on the condition of anonymity.
This progress follows the US and India announcing during Vice President JD Vance’s visit that they had reached an agreement on the broad parameters of negotiations. While both parties emphasized it as significant advancement, agreement on the so-called “Terms of Reference” primarily outlines a plan for more comprehensive discussions to come.
In the interim, several US companies reporting on first-quarter performance indicated that tariffs are impacting their businesses.
Consumer giant Kimberly-Clark reported that tariffs would cost it approximately $300 million this year, with CEO Michael Hsu observing that “the range and degree of tariffs, as well as the countries involved, have shifted considerably since maybe where we were at the end of the last quarter.”
GE Aerospace CEO Larry Culp mentioned to Reuters that he recently met with Trump and urged him to restore a tariff-free regime for the aerospace sector that existed under a 1979 agreement. Culp stated that the company’s stance was “acknowledged” by the administration but added that “it’s not the only matter they’re addressing.”
Despite tariff costs, GE Aerospace maintained its outlook for the year. “We’ll continue to advocate for this point respectfully in hopes of reinstating the conditions we had prior to the recent tariff actions,” he stated in the interview.
The affirmation of its outlook contributed to a more than 5% increase in GE Aerospace shares. Indeed, investors, unsettled over the past two months by Trump’s harsh tariffs and unpredictable approach to implementing them, appeared to find some comfort in the earnings being reported. The S&P 500, following a significant down day on Monday, climbed approximately 2.5% on Tuesday.
(Reporting by Andrea Shalal, David Lawder, Nupur Anand, Trevor Hunnicutt, Brendan O’Brien, Nandita Bose, Steve Holland, Noel Randewich, Rajesh Kumar Singh, Savyata Mishra, and Neil J Kanatt; Writing by Dan Burns; Editing by Colleen Jenkins and Andrea Ricci)
