Three weeks after US President Donald Trump effectively declared a trade war on the world, new economic forecasts and surveys will point to its initial impact.
The International Monetary Fund, a few blocks from the White House, lowered its economic growth forecast in its latest projections released on Tuesday.
The following day, purchasing managers’ indices from Japan to Europe and the United States will for the first time offer a comprehensive picture of manufacturing and services activity since April 2 when Trump launched his global tariff offensive (currently partially suspended). Business surveys from major economies will also be on the agenda.
This overall situation will offer an opportunity for finance ministers and central bank governors gathered in Washington to make a preliminary assessment of the damage caused by Trump’s attempts to reshape the global trade system.
IMF Managing Director Kristalina Georgieva said on Thursday: “Our new growth forecast will include a significant downward revision, but there will be no recession.” “We will also see upward revisions to inflation forecasts for some countries. We caution that prolonged high uncertainty increases the risk of financial market stress.”
The dark clouds hanging over the global economy are unlikely to disperse in the short term. Jerome Powell, the chair of the Federal Reserve, said on Wednesday that the Fed is “prepared to wait for a clearer picture” before considering any adjustment to its monetary policy, while Christine Lagarde, the president of the European Central Bank, was unable to determine whether the uncertainty has reached its peak.
Meanwhile, Georgieva hopes that the G20 finance ministers’ meeting to be held in the coming days will ease tensions in global trade relations.
She said: “We need a more resilient world economy, not one that is fragmented.” The meeting in Washington “provided an important forum for dialogue at a critical juncture.”
Meanwhile, as tensions between Trump and the Federal Reserve escalate, questions have once again been raised about whether he will seek to limit the Fed’s independence. Charles Evans, president of the Federal Reserve Bank of Chicago, warned against any such actions when speaking at an event on Sunday.
U.S. National Economic Council Director Kevin Hassett said on Friday that Trump is studying whether he has the ability to fire Federal Reserve Chair Jerome Powell. The dollar weakened against all major currencies. Traders said these remarks prompted hedge funds to sell the dollar on Monday. Gold prices, which usually move inversely to the dollar, hit a record high. U.S. Treasuries fell and the yen strengthened.
Last week, Trump was frustrated that the Federal Reserve had not cut interest rates yet. He posted on social media that Powell “should step down fast enough!” Analysts such as Christopher Wong believe that criticizing the Federal Reserve not only undermines the principle of central bank independence but also risks politicizing US monetary policy, which would deeply unsettle the market.
“To be frank, it’s unbelievable that Powell was fired,” said Mr. Wong, an FX strategist at OCBC Bank in Singapore. “If the credibility of the Fed is questioned, it could seriously undermine confidence in the US dollar. The market may continue to demand a political risk premium for dollar assets, especially if this claim is confirmed in the coming weeks or days.”
Chicago Fed President Austan Goolsbee warned against attempts to undermine the independence of central banks. “Economists are almost unanimous that the independence of monetary policy from political interference – that the Fed or any central bank can fulfill its duties – is crucial,”
French Finance Minister Éric Lombard warned that if Trump fires Powell, the credibility of the US dollar will be threatened and the US economy will fall into instability.
The US stock market recorded a decline this week as the Federal Reserve refused to support the idea of the market. Mary Daly, president of the Federal Reserve Bank of San Francisco, said that due to inflation risks, the Fed may maintain interest rates for a longer period than expected, but it is still possible to cut rates later this year.
According to the latest national economic survey by CNBC, due to widespread dissatisfaction among the public with US President Trump’s handling of issues such as tariffs, inflation and government spending, his economic approval rating is at its lowest point during his presidency.
The survey found that the economic optimism brought about by Trump’s successful re-election has vanished completely. Now, the number of Americans who believe the economic situation will deteriorate has reached its highest level since 2023, and public sentiment towards the stock market has also sharply turned pessimistic.
A survey of 1,000 Americans shows that 44% of respondents approve of Trump’s performance as president, while 51% disapprove. This result is slightly better than the final poll conducted by CNBC when Trump left office in 2020. However, on economic issues, the survey shows that Trump’s approval rating is 43% and disapproval rating is 55%. This is the first time during his presidency that he has received a net negative evaluation on economic issues in any poll conducted by CNBC.
