IMF issues grim warning about Trump’s tariffs
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I am Leon Gettler. My job is to review and monitor the week’s news in business, finance and economics. I bring it all to you, every week.
This is episode number 11 in our series for 2025 and today’s date is Friday April 25
I’ll be talking to Margot Faraci, a senior executive and global leadership expert with over two decades of experience in the corporate world. We will discuss all things about toxic leadership, work culture, bad managers, and psychologically unsafe work environments.
And I’ll be talking to independent economist Saul Eslake about the government and opposition platforms in the lead up to the election and their spending. And how this is all panning out when people are feeling insecure about the impact of Donald Trump.
But first, let’s talk to Margot Faraci
So what’s happening in the news?
First, the International Monetary Fund has warned that Donald Trump’s tariffs will “significantly slow” economic growth in the world’s major economies, including in Australia, and the US will be hardest hit. The IMF has slashed its global growth forecast for 2025 from 3.3 to 2.8%, and issued “upward revisions” to inflation in the US and other western economies. Australia’s economy is not expected to escape unscathed, with its gross domestic product (GDP) expected to only grow by 1.6% in 2025, significantly down from the 2.1% growth forecast by the IMF in January. The worst impacted was the United States, where the IMF now predicts its economy to expand by 1.8% this year, steeply down from its previous forecast of 3.3% issued in January. The downward revision was the largest of any major global economy. The IMF’s forecasts were compiled less than three weeks after Mr Trump unveiled the tariffs on what he called “liberation day” on April 2. The IMF said the swift escalation of trade tensions and “extremely high levels” of uncertainty about future policies would have a significant impact on global economic activity. “We are entering a new era as the global economic system that has operated for the last 80 years is being reset,” IMF chief economist Pierre-Olivier Gourinchas told reporters.
The US dollar has fallen to its lowest level in years as investor confidence in the U.S. economy took another hit over President Donald Trump’s plans to shake up the Federal Reserve, which would throw into question the independence of the central bank. White House economic adviser Kevin Hassett said on Friday that the president and his team were continuing to study whether they could fire Fed Chair Jerome Powell, just a day after Trump said Powell’s termination “cannot come fast enough” as he called for the Fed to cut interest rates. “Powell does not report directly to Trump, so (Trump) cannot actually fire him. He can only be removed from office under certain procedures, which one would think have a higher barrier… but can the president move the cogs and wheels to undermine the perceived independence of the Fed? Sure, he could,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. “I would argue that they don’t even need to sack Powell immediately,” Varathan said. “You just need to create the perception that you could fundamentally change the view of an independent Fed. Varathan said this was “a buffet for any dollar bear… from the heightened uncertainty around the self-harm from tariffs to the loss of faith even prior to the Powell news.” Trump’s sweeping tariifs and uncertainty over his trade policies have sent global markets into a tailspin and darkened the outlook for the world’s largest economy, in turn weakening the dollar. Against a basket of currencies, the dollar slid to a three-year low on Monday.
And with economic relations between the two careening off the rails, China and the US are headed toward what could be a Cold War that extends beyond trade—to deepening conflict or even military tension as both seek to form their own blocs. The current scenario was once unthinkable. During President Trump’s first presidency, Washington and Beijing were both reluctant to throw their deep entanglements into complete disarray. Their first trade war played out over two years and involved frequent negotiations and fear of escalation on both sides. This time, the two countries have effectively erected trade embargoes against each other in less than three months and are taking economic warfare into new territory. What is at stake is overall global security as well as economic stability for many years to come. “The U.S. and China are in a state of economic decoupling and there do not seem to be any guardrails to prevent escalations in trade tensions from spreading to other areas,” said Rick Waters, a former senior U.S. diplomat who now runs the China centre at the Carnegie Endowment for Global Peace. “It’s becoming more difficult to argue that we’re not in a new Cold War.” After the initial shock from the magnitude of Trump’s recent tariff hits, Beijing is now in full-blown retaliatory mode, vowing to “fight to the end.” And its tools to hit back at the U.S. aren’t limited to economic weapons such as retaliatory tariffs, blacklists targeting U.S. companies and restrictions on its exports of critical minerals.
Beijing’s recent statement that it is done with tit-for-tat signals that it might be moving to other, noneconomic methods. Both countries have accused each other of increasingly brazen cyberattacks. One option Beijing has involves leveraging the data, call logs and other information it gathered from years of intrusions into computer networks at U.S. ports, water utilities, airports and other targets. As the communication stalemate continues, both powers are seeking to recruit allies in their battle. The Trump administration is currently seeking to cut deals with dozens of countries to cooperate in isolating China. Meanwhile, Xi and his senior lieutenants have fanned out in recent days, trying to pull trading partners away from the U.S. In exchange for reductions in tariffs imposed by the U.S., the Trump administration is planning to pressure more than 70 nations to bar China from shipping goods through their countries to the American market, restrict Chinese investments and prevent cheap Chinese products from flooding their markets. In short, as Trump told the Spanish-language program “Fox Noticias” last week, he may want countries to choose between the U.S. and China. But building coalitions is unlikely to be easy for either side. Even though Beijing’s manufacturing overdrive has antagonized many countries big and small, some of them, especially those in Asia that count China as one of their biggest trading partners and sources of investment, are finding it very hard to completely pivot to the U.S.
And China has warned it will hit back at countries that make deals with the US that hurt Beijing’s interests, as the trade war between the world’s two biggest economies threatens to drag in other nations. This comes after reports that the US plans to pressure governments to restrict trade with China in exchange for exemptions to US tariffs. The Trump administration has started talks with trading partners over tariffs, with a Japanese delegation visiting Washington last week and South Korea is set to start negotiations this week. Since returning to the White House in January, Trump has imposed hefty taxes on Chinese imports, while other countries have also been hit with levies on their goods. “Appeasement cannot bring peace, and compromise cannot earn one respect,” a Chinese Commerce Ministry spokesperson said, “China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will never accept it and will resolutely take countermeasures”. The remarks echoed an editorial last week in the state-controlled China Daily, which warned the European Union against trying to “appease” the US. The comments came after reports that the US plans to use tariff negotiations to pressure dozens of countries into imposing new barriers on trade with China. Trump has said more than 70 countries have reached out to start negotiations since the tariffs were announced. Just hours after steep levies on dozens of America’s trading partners kicked in earlier this month, he announced a 90-day pause on those tariffs to all countries bar China, in the face of mounting opposition from politicians and the markets. Trump has imposed taxes of up to 145% on imports from China. Other countries are now facing a blanket US tariff of 10% until July. His administration said last week that when the new tariffs are added on to existing ones, the levies on some Chinese goods could reach 245%. China has hit back with a 125% tax on products from the US and vowed to “fight to the end”. The trade war between the world’s two biggest economies has sent shockwaves through global financial markets earlier this month.
Besides all the great radical reforms of the Pontiff, in addition to him reaffirming that homosexuality is not a crime and asking the Church of Rome to address the housing crisis, was the way he overhauled the Vatican’s finances, stripping its most powerful office of its significant financial assets. after dubious investments squandered millions of euros in church donations, sparking an embarrassing scandal and prompting an ongoing corruption investigation. A new law enacted by the pope ordered the secretariat of state, the diplomatic and administrative arm of the Holy See, to transfer all its financial holdings and real estate assets to another officer, the Administration of the Patrimony of the Apostolic See, which administers the Vatican’s finances, by Feb. 4. The changes, included in a law made public Monday, follow a Vatican investigation into the mismanagement of funds at the secretariat of state. One of the most prominent investments made by the secretariat of state involved the purchase of a London property that was bought in part with money donated by the faithful. In October 2019, Vatican prosecutors ordered a raid on the offices of the Vatican’s banking regulator as part of an investigation into the purchase. The investigation led to the resignation of the Vatican’s chief of security, the removal of several Vatican employees and officials, and the arrest of an Italian banker involved in the transaction. No one has been charged in the case, however, and the banker has been released. The late Pope was a remarkable man who has left a great legacy.
And in the final days leading up to Australia’s election on May 3, the Coalition which is now behind in the polls, is homing in on undecided and soft voters, staging a last-ditch and huge advertising blitz as it doubles down on its promise of better economic management during a period of global uncertainty sparked by Donald Trump’s trade war. Ahead of pre-poll voting opening on Tuesday, the opposition released estimates that Trump’s America-first tariff agenda could worsen the budget deficit by a further $110 billion over the next four years, hindering the nation’s already limited capacity to respond to such a shock other than through tax hikes. The Liberal Party will spend about half of its ad budget in the last eight to 10 days of the campaign, given undecided voters tend to wait until closer to polling day, or the day itself, before making up their minds. the Coalition will use its estimates of the potential economic fallout of Trump’s tariff wars to bolster its claim that it is the best party to revive growth and manage the budget.
Australian shares are careering towards a bear market as US President Donald Trump’s trade war starts to hit the bottom line of ASX-listed companies and central banks delay cutting interest rates, delivering a fresh blow to valuations. That’s according to advisory firm MST Marquee, which expects the world’s largest economy to tip into a recession, delivering a reality check to local earnings forecasts which it warns are still far too high. The benchmark S&P/ASX 200 Index has already dropped more than 9% from its February peak amid concern about global growth but MST believes equities face an even bigger leg lower because the US Federal Reserve appears to be in no rush to cut interest rates to arrest a slowdown. Chairman Jerome Powell stated last week that the Fed can afford to be patient in judging how to set policy, and that interest rates should not be lowered until it becomes clearer that Trump’s tariff plans won’t reignite inflation. “The outlook for corporate profits is set, and it’s down,” MST’s senior research analyst Hasan Tevfik said.. “The outlook for economic growth is also set, and it’s down, and at the same time, equity valuations aren’t cheap in any way.” Tevfik said that of the “three big building blocks” for the market outlook – that is profits, valuation, and monetary policy – interest rates were unlikely to change given the prospect for higher inflation. “Markets are heading another 5% to 10% lower, which could then force central banks to step in,” Tefvik said. “Current domestic profit forecasts look too high,” said George Boubouras, a managing director at K2 Asset Management, who said that earnings expectations would likely fall until tariff policies had been settled. Trump announced sweeping global tariffs earlier this month before putting the majority of those on hold until July. However, he has pressed ahead on barriers with China, sparking a tit-for-tat increase in restrictions, and on specific goods. He has also suggested more tariffs will be announced, including more restrictions on pharmaceuticals and electronics. Boubouras said current forecasts for earnings growth on the ASX 200 of between 8% and 9% over the next year were “too optimistic”. “Get comfortable being uncomfortable”, Boubouras added.
And that’s it for this week.
And next week I’ll be talking to Robert Lockyer, the CEO and founder of Delta Global – the leading supplier of luxury sustainable packaging globally. Utilising their data intelligence platform, AI and design-led team, Delta Global support the packaging and sustainability efforts of some of the biggest retailers and household names internationally – such as NET-A-PORTER, Lane Crawford, and Tom Ford and Zimmerman.
And I’ll be talking to AMP Capital chief economist Shane Oliver about how the market is performing in the wake Trump’s tariff wars.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com
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Looking forward to the next episode of Talking Business.
