IMF Downgrades Global Growth Forecast Amid Trade Tensions

The International Monetary Fund (IMF) has downgraded its forecast for US economic growth to 1.8% this year, the biggest downgrade among advanced economies, due to uncertainty caused by trade tariffs imposed by President Donald Trump. The global economy is expected to grow by 2.8% this year, down from a previous forecast of 3.3%. The IMF predicts a "significant slowdown" in global growth due to the sharp increase in tariffs and uncertainty. The UK's growth forecast has also been cut to 1.1% this year, but is expected to be stronger than Germany, France, and Italy. The IMF also warned of a 40% probability of a US recession this year, higher than its previous estimate of 25%.

European markets are expected to open higher on Wednesday due to a rebound in global market sentiment, driven by reduced concerns over a US-China trade war and President Trump's comments on not firing Federal Reserve Chair Jerome Powell. The FTSE 100, DAX, CAC, and FTSE MIB are all expected to open higher, with gains of 86, 457, 84, and 446 points, respectively. Investors will be watching earnings from NatWest and Heathrow Airport, as well as data releases on euro zone services and manufacturing activity. Trump's comments on China tariffs and the Fed chair have boosted sentiment, with US stock futures surging 500 points. Spot gold has fallen from a record high following Trump's statements.

The International Monetary Fund (IMF) has downgraded its 2025 growth forecasts for major Asian economies, citing trade tensions and "high policy uncertainty." The IMF cut its projections for China and India to 4% and 6.2% respectively, down from 4.6% and 6.5% in January. Japan's growth forecast was also lowered to 0.6% from 1.1%. Globally, the IMF reduced its 2025 growth forecast to 2.8% from 3.3%, attributing the decline to tariffs announced by the US and its trading partners, which it said were "a major negative shock to growth."

US President Donald Trump has signaled a potential U-turn on his trade war with China, stating that tariffs on Chinese goods will "come down substantially" from their current rate of 145%, although they won't be eliminated entirely. Trump's comments came after Treasury Secretary Scott Bessent said the high tariff rates have effectively embargoed trade between the two economies and are unsustainable. The remarks boosted a Wall Street rally, with US and Asian stock indexes rising. China has responded to the trade war by raising tariffs on US goods to 125% and restricting exports of critical minerals, and has insisted that any future trade talks must be on equal terms.

US President Donald Trump's recent comments on easing tariffs against China may be seen as a sign of anxiety, giving Beijing leverage to hold out for a better trade deal, according to analysts. Trump's remarks that tariffs "will not be as high as 145 per cent" and will "come down substantially" are viewed as a signal of US pressure, rather than a genuine shift in the US position, allowing China to maintain its stance in trade negotiations.