IMF sees slump from tariffs, Trump tries to calm markets

What happened

The International Monetary Fund (IMF) Tuesday downgraded global growth forecasts, predicting that the U.S. and global economies will slow significantly due to President Donald Trump's trade war. Trump and Treasury Secretary Scott Bessent later boosted the slumping markets by suggesting the 145% tariffs on China will be temporary and walking back the president's threats to fire Federal Reserve Chair Jerome Powell.

Who said what

The IMF predicted that the global economy will grow 2.8% this year, down from its January forecast of 3.3%, due mostly to damage and uncertainty from Trump's imposition of America's steepest tariffs in a century. The economic "landscape has quickly changed" this year, said IMF chief economist Pierre-Olivier Gourinchas. "We are entering a new era as the global economic system that has operated for the last 80 years is being reset."

Trump's "double-barreled tariff plan" will hurt America's trading partners, The Washington Post said, but the IMF is projecting the "slowdown will be particularly sharp for the U.S. economy," with annual growth falling to 1.8% from the January projection of 2.7%. The U.S. inflation forecast was also upped by a percentage point, to 3%. The IMF forecasts are "largely in line" with those from the Fed and "many private-sector economists," The Associated Press said.

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Markets rose on reports that Bessent said in a private speech Tuesday that Trump's China tariffs were not "sustainable" and he expected "de-escalation" in the U.S.-China trade war once the "slog" of negotiations with Beijing began. Trump later said his "high" tax on Chinese imports "will come down substantially." He also said he had "no intention of firing" Powell, after his repeated recent suggestions that he could and might sack the Fed chair spurred an "unsettling sell-off in stocks, government bonds and the dollar," The New York Times said.

What next?

The IMF's Gourinchas said global "growth prospects could improve immediately" if the U.S. and other countries stand down and "implement clear and predictable trade rules."