IMF: First-half global growth exceeds previous forecast, but future outlook dims

The latest World Economic Outlook (WEO) from the International Monetary Fund (IMF) released this week sees the global economy growing by 3.2 % this year and 3.1 % next year. The updated forecast for 2025 raises the IMF’s July WEO estimate by 0.2 percentage points to reflect higher-than-expected growth in the first half of the year. Most of the growth was driven by firms stockpiling inventories in anticipation of US tariff increases. Global goods trade also grew briskly in the first half of this year. The latest released data from July show that the volume of goods trade was up by over 5 % y-o-y, well outpacing growth seen in recent years. Further reasons for higher-than-expected growth included the US decision to delay implementation of import tariffs as well as slightly lower-than-anticipated effective, i.e. average, tariff levels. The effective US import tariff, measured as the ratio of tariff revenue to the value of imports, began to rise in April, reaching roughly 10 % in June. The effective tariff rate could still increase further if additional tariffs are imposed or the US gets tough with low-tariff countries complicit in helping others circumvent high tariffs. Overall, tariffs are expected to have a greater impact in the second half of the year. With companies no longer stockpiling in anticipation of higher tariffs, global trade should slow down in the final months of this year and next year. The latest WEO sees trade in goods and services rising by 3.6 % for 2025 overall and 2.3 % next year.

While the IMF’s outlook for China remained unchanged, it also noted emerging downside risks to growth that include ongoing weakness in China’s real estate sector, the rising likelihood that robust export growth falters and the fading impact of the country’s industrial policy on productivity. The IMF also reduced its forecast for Russian growth, partly due to base effects from last year's high growth. With regards to India, the IMF slightly raised its forecast to reflect higher-than-expected growth in the first half of this year –and despite the US imposition of a 50 % tariff rate on major Indian goods categories on August 27.

Growth forecasts for select countries, %. (Earlier forecasts in parentheses.)

Sources: IMF’s October 2025 WEO; World Bank October Regional Economic Updates; OECD Economic Outlook, Interim Report September 2025; EBRD Regional Economic Prospects, September 2025.

The IMF also examines scenarios what would happen to the global economy if there were changes in US tariff policy. Under the first scenario, whereby the US raises import tariffs to the highest levels it has proposed in the tariff announcements made around early April's Liberation Day or thereafter, the effective import tariff rises by roughly 10 percentage points from the current level. Tariffs also disrupt international production chains by reducing the productivity in the export sector by 1 %. The scenario’s negative impact on global GDP would be 0.3 % in the first year compared to the current situation. The negative impact worsens over the long term, with the tariff hikes lowering global GDP by about 0.5 %.

Under the second scenario, the US lifts all tariffs imposed by president Trump during his second term in office, thereby reducing the country’s effective import tariff by about 15 percentage points. With reduced tariffs, global GDP increases by about 0.3 % in the first year. There is an even larger impact from eliminating trade policy uncertainty, allowing the global economy to grow by an additional 0.5 % in the first year. The impacts from eliminating uncertainty fade over time, with the long-term positive impact of the removal of tariffs falling to 0.3 %.

Other studies also consider tariff impacts in the current environment. In our just-released policy brief, Bank of Finland researchers examine the impacts on the global economy from US import tariffs and Chinese retaliatory tariffs imposed this year. The impact is quite similar to the IMF calculations with US tariffs reducing global GDP by 0.3 % and the retaliatory tariffs imposed by China on the US increasing the combined effect to 0.4 % compared to a situation without tariffs. Tariffs reduce US GDP in the first year by 0.7 % and Chinese GDP by roughly 1 %. The impact from the current tariff regime on the euro area is less severe, lowering GDP by only around 0.2 %.

Looking at other institutional forecasters, the Kiel Institute for the World Economy finds that this summer’s tariff agreement between the US and EU would lower EU GDP by 0.1 %. The estimates from the Yale Budget Lab and Tax Foundation focus on the impacts of tariffs on the American economy. The Tax Foundation estimate, based on the situation before Trump’s September 25 announcement of additional tariffs on certain pharmaceuticals, heavy trucks, furniture and cabinetry, found that the long-term negative impact of tariffs on US GDP would be about 0.8 %. The Yale Budget Lab estimate, which incorporates the late-September additions to the tariff regime, sees a larger negative impact on US GDP growth, lowering it by 1.1 % in the middle of next year and 0.4 % over the long term.