US growth forecast to be hit hardest from Donald Trump’s tariffs, IMF says | BBC News

Key Concepts

• Tariffs: Taxes imposed on imported or exported goods.
• Federal Reserve (The Fed): The central banking system of the United States.
• Interest Rates: The cost of borrowing money.
• Inflation: A general increase in prices and fall in the purchasing value of money.
• Recession: A significant decline in economic activity spread across the economy, lasting more than a few months.
• Dow Jones Industrial Average (Dow), S&P 500, NASDAQ: Major US stock market indexes.
• IMF (International Monetary Fund): An international organization that promotes global monetary cooperation, financial stability, international trade, high employment and sustainable economic growth.
• G7: A group of seven of the world's advanced economies.

US Market Turmoil and Trump's Stance on the Fed

• Market Uncertainty: The New York Exchange opened after market turmoil driven by Donald Trump's desire to fire Fed Chair Jerome Powell. Legally, this is questionable, but the attempt itself is unsettling investors.
• Dow's Performance: The Dow is on track for its worst April since the Great Depression, reflecting ongoing uncertainty.
• Investor Sentiment: Investors are on edge due to the lack of clarity on tariff rates. Solid news about lowering or permanently adjusting tariffs would boost confidence.
• Tariff Impact: Sky-high tariff rates on Chinese imports into the US and US goods imported into China are negatively impacting the market.
• Index Performance: All three major US indexes closed more than 2% lower yesterday, followed by a slight recovery this morning, edging close to 2% up.
• Overall Decline: Since April 2nd, when President Trump announced reciprocal tariffs, all three major US indexes are down more than 9 percentage points.
• Shift in Investment: Investors are switching from American to foreign stocks, with some foreign stocks experiencing their best results in the last 52 weeks.
• Pressure on the Dollar: Rising bond yields and pressure on the dollar are putting pressure on the president's economic policy.
• Trump vs. Powell: President Trump is targeting Fed Chair Jerome Powell, blaming him for economic issues. He uses social media to criticize Powell, calling him "Mr. Too Late" and a "major loser."
• Interest Rate Disagreement: Trump wants the Fed to lower interest rates to make borrowing cheaper, while the Fed is trying to safeguard the economy and fight inflation.
• Fed's Mandates: The Federal Reserve has two mandates: maximum employment and price stability.
• Powell's Stance: Chair Powell has indicated that the Fed is not ready to cut interest rates and intends to serve out his term until 2026, despite Trump's disapproval.

IMF Downgrade of US Growth Forecasts

• IMF Downgrade: The IMF has downgraded US growth forecasts by nearly 1% (0.9%).
• Global Growth Forecast: The IMF has downgraded global growth, estimating it to be between 2.5% and slightly over 3% this year.
• US Growth Forecast: The US is now expected to expand by less than 2% this year. This doesn't necessarily mean a recession is forecasted.
• Recession Risk: The IMF's chief economist stated that the risk of recession in the US is close to 40%, up from 25% in the autumn.

UK Growth and Trade Deals

• UK Growth Downgrade: The UK's growth forecast has been downgraded to 1.1% for this year, aligning with official UK forecasts.
• Factors Affecting UK Growth: The IMF attributes the downgrade to tariffs, domestic forces (tax rises), and changes in energy price regulations.
• Trade Deal Challenges: The Japanese delegation reported difficulties in making progress in trade negotiations with the US, as new problematic issues arise at each meeting.
• Temporary Tariff Relief: Many countries have only temporary relief from retaliatory tariffs.
• US Leverage: The US holds many of the cards in trade negotiations, creating obstacles for other countries.
• IMF's Perspective: The IMF suggests that removing trade barriers would restore previous growth prospects, but this is not happening quickly.

Synthesis/Conclusion

The US economy faces significant uncertainty due to trade tensions, particularly with China, and the conflict between President Trump and the Federal Reserve. The IMF has downgraded US growth forecasts, reflecting these challenges. The global economy is also affected, with downgraded growth forecasts and difficulties in trade negotiations. The situation is complex, with multiple factors influencing economic performance, and the future remains uncertain.