Trump’s tariffs overshadow IMF and World Bank meetings

The men and women who run the global economy will arrive in Washington this week for the spring meetings of the International Monetary Fund and World Bank with one goal: get out of town without President Donald Trump noticing them.

These financial institutions, created under U.S. auspices after World War II, symbolize the globalized economy that the president abhors. Where Trump craves unilateral action, the fund and the bank give officials from almost 200 countries a voice. The issues that the global bodies prioritize, such as climate change, he rejects as unimportant.

The world’s central bankers and finance ministers this week are scheduled to discuss the economic implications of public debt, societal aging and artificial intelligence. But perhaps the most important question shadowing the global economy - what will become of Trump’s plan to raise U.S. import taxes to their highest level in more than a century - is not on the official program.

“It’s not a particularly meaty agenda. I think the institutions are deliberately trying to keep a low profile. But obviously one of the major questions that’s going to surface over the course of this week is the U.S. posture vis-à-vis these institutions,” Clemence Landers, vice president of the Center for Global Development, told reporters last week.

In February, the president ordered a review of U.S. support for all international organizations. Trump’s directive cited several United Nations bodies, but its pall extended to the fund and bank. Both organizations also were criticized in “Project 2025,” the Heritage Foundation blueprint for governing that was written by prominent Trump supporters.

The report called for the United States to withdraw from both financial organizations, saying they “espouse economic theories and policies that are inimical to American free market and limited government principles.”

Leaders of both institutions struck a conciliatory tone toward the White House in recent remarks as they considered changes in their operations that might placate the United States.

“We’re having a constructive dialogue with the U.S. administration,” said Ajay Banga, president of the World Bank. “I don’t know where it’ll end. But I’ve got no problem with the dialogue I’m having. They’re asking the right questions and we’re trying to give them the right answers.”

This week’s meetings come as the global economy is virtually being held hostage by the mercurial American president. On April 9, one week after announcing a 10 percent tariff on almost all foreign-made goods plus higher import taxes on dozens of U.S. trading partners, the president hit pause on the most onerous levies, saying he would negotiate them with more than 70 nations.

Trump set a 90-day deadline for results and began preliminary talks with Japan, India and South Korea. Large and small nations alike, fearing serious economic damage, are eager to persuade Trump to lower tariffs that range up to 50 percent on some goods.

The president’s 25 percent tariffs on steel, aluminum, automobiles and auto parts remain in place, and he has promised to impose still more levies on pharmaceutical products and semiconductors.

The flurry of import taxes has inflated the average U.S. tariff rate from one of the world’s lowest at 2.4 percent to one of the highest, near 25 percent. The abrupt change in global conditions - breaking with 80 years of bipartisan U.S. economic policy - has paralyzed business and government decision-making.

“This is the most seismic change to the global economy and, I would argue, to geopolitics in certainly all of our lifetimes, if not since the end of the Second World War,” said Douglas Rediker, managing partner of International Capital Strategies, a financial advisory firm. “The world as they knew it no longer exists.”

So far, the administration has offered few details of its goals in the diplomatic bargaining. For now, U.S. negotiators, led by Treasury Secretary Scott Bessent, are focusing on the 15 largest economies.

Many analysts doubt that significant results are possible within such a short time frame; previous U.S. trade deals required years of negotiations. But on Thursday, welcoming Italian Prime Minister Giorgia Meloni to the White House, Trump said he was confident of reaching quick agreements, including with the European Union.

“We have a lot of countries that want to make a deal. Frankly, they want to make deals more than I do,” the president said.

Economic and financial damage from the tariff campaign, meanwhile, is mounting. Nearly $6 trillion in global stock value evaporated over the past month, since Trump revved up his import tax plans, according to data compiled by Bloomberg.

Analysts at Citigroup Global Markets last week cut their 2025 global growth estimate by half a percentage point while lowering expectations for the United States, Europe, Canada, Japan, China, Mexico, India and South Korea.

In the United States, consumers are rushing to buy some goods before the highest tariffs hit. Trump recently exempted smartphones and laptops from his 145 percent tax on Chinese goods, giving Americans a buying window, but nobody expects it to last.

Any slowdown in consumer spending “may still be a few months down the road,” Citigroup said. “But the second half of the year looks weak, and we see growth [then] hovering near zero.”

Global trade flows are expected to shrink this year after growing by nearly 3 percent in 2024, according to the World Trade Organization. And the world economy will grow at an annual rate of 2.2 percent, its slowest pace since the pandemic collapse in 2020.

The International Monetary Fund this week will mark down its global growth forecast, though it does not anticipate a global recession, Kristalina Georgieva, the organization’s managing director, said on Thursday. In a speech, she addressed “the reboot of the global trading system” and warned against the costs of rising protectionism without directly criticizing the U.S.

In some foreign capitals, policymakers are beginning to respond to the world created by Trump.

On Thursday, the European Central Bank cut its main policy rate by a quarter percentage point to 2.25 percent, with ECB President Christine Lagarde saying “the outlook for growth has deteriorated owing to rising trade tensions.”

South Korean officials last week introduced a supplementary budget plan of more than $8 billion to insulate the economy from trade war fallout. And Japanese Prime Minister Shigeru Ishiba is considering a potential stimulus package of tax cuts or direct cash payments that could be worth almost $100 billion, according to the consultancy Teneo.

Trump’s aim to slash U.S. imports in favor of greater domestic production would put pressure on two export powers, China and Germany, to overhaul their economic models. For now, both countries are stuck in a sort of purgatory as they await greater clarity from Washington.

China, which has emerged as the chief target of Trump’s trade hostilities, is in no rush to reach a deal with the White House. Beijing has taken retaliatory measures against the U.S., ordering a halt to exports of rare earth minerals.

“We haven’t seen a bold stimulus plan here,” said Andy Rothman, CEO of Sinology LLC, an investment advisory firm. “The government really just wants to wait and see how bad things get.”

At the heart of Europe, Germany’s traditional business model, which relied on cheap Russian energy to produce manufactured goods for Chinese customers, is obsolete. But the European regulatory changes needed to increase lagging productivity and develop a unified capital market have not occurred.

In Europe, Lagarde made a point at her post-meeting news conference of stressing the need for Europe to take long-overdue action on domestic reforms.

“Europe needs to strengthen its domestic market,” said Carsten Brzeski, global head of macro research for ING in Frankfurt. “The Trump tariffs just aggravate and enhance the already well-known European problems.”

No matter what emerges from Trump’s 90-day trade deal sprint, his actions over the past three months have hurt U.S. diplomatic credibility. Imposing new import taxes on goods from countries that had signed “free trade agreements” with the U.S. violated the spirit, if not the letter, of those arrangements, according to Alan Wolff, the WTO’s former No. 2 executive.

As U.S. trading partners have tried to make sense of the new U.S. stance, they are giving more attention to cultivating trade links that skirt the world’s largest economy.

New Zealand Prime Minister Christopher Luxon this month proposed expanding an existing 12-nation trade pact to include the European Union in a new “rules-based” grouping that would fill the void left by Washington’s protectionist turn.

“There is diversification taking place. … It is not de-globalization,” Wolff said. “They’re seeking global sources of markets and supplies. Just moving away from the United States.”