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This is Andrew Peach with World Business Report.
Breaking news in the last hour.
The International Monetary Fund slashes it's outlook for global growth.
adding that US tariffs and market uncertainty will lead to a significant worldwide slowdown.
The IMF says the global economy will grow by 2 .8 % this year, down half a percentage point from its previous forecast. We project that global trade growth will be more than cut in half, from 3 .8 % last year to 1 .7 % this year.
The price of gold has hit a new high, US stocks and the dollar are down.
president Trump is blaming the FED for not lowering interest rates.
Also on the way, a private island loved by musicians like Stormzy and Rhianna up for sale for $33 million.
There's not every day you get to sell an entire island.
Music connections obviously aren't helpful because it makes it newsworthy and it gives it interest. First those IMF forecasts for global growth.
The IMF says US tariffs and market uncertainty will lead to a worldwide slowdown.
The biggest to downgrade among advanced economies is for the US itself with the IMF revising its original projection of 2 .7 % down to 1 .8%.
China facing those steep US tariffs has also seen a downward revision of 0 .6%.
Let's have a listen to Pierre Olivier -Gorinchers who is the chief economist at the IMF and gave these gloomy predictions at a news conference a short time ago.
Beyond the abrupt increase in tariffs, the surge in policy uncertainty is a major driver of the economic outlook.
If sustained, the increase in trade tensions and uncertainty will slow global growth significantly.
Now, while global growth remains well above recession levels, all regions are negatively impacted this year and next.
These trade tensions will will greatly impact global trade.
We project that global trade growth will be more than cut in half from 3 .8 % last year to 1 .7 % this year.
Live to Washington, and our North America Business correspondent Michelle Fleury.
Put some more flesh on the bone of what we heard from the IMF today, Michelle.
Yes, so I mean, they talked about the sharp rise in tariffs since the start of the year, and they basically said that you know tariffs haven't been this high.
In fact they've exceeded the levels reached during the Great Depression and this marked a departure from a period when really we've enjoyed a relatively low barrier to trade that began since World War two and so because of that they write in their report that they see this as marking the beginning of a new era for the global economic system and with that they basically downgraded their forecast for global economic growth this year to 2 .8 % from 3 .3 % and as you pointed out the US the world's largest economy suffering the biggest hit its forecast was downgraded by nearly 1%, six tenths of a percent
for China so really hitting hard. What was interesting and what stood out to me was that they pointed out that the kind of negative impact it's had on consumer sentiment in other words, how Americans feel about this has been far greater than in other countries and that's having a knock -on effect on consumption here which accounts for 2 thirds of economic activity.
Right, and they were clear to say this is about tariffs but also I thought it was interesting to make absolutely certain that they weren't laying all the blame for this at Donald Trump's door.
They were saying oh well of course some of these things were going awry in the US economy under the previous government.
Well I mean I think you can't escape from the you know, while there may have been problems with inflation before, the progress that had been made has definitely stalled and as a result of these tariffs, the IMF is saying they think inflation in the US will be much higher going forward. They also touched on the independence of the central bank.
Remember, it was Donald Trump's comments yesterday criticising the Federal Reserve that really sent markets into a bit of a tizzy yesterday as they were kind of concerned about the independence of the central bank and whether or not Donald Trump was trying to pressure them to act by cutting rates and you know that independence is seen as crucial to sort of the health of the US economy so a lot of these kind of crosscurrents in terms of how the Trump administration is trying to reshape the world order, the world economic order, at least when it to trade and some early kind of assessments here from the IMF,
kind of giving us a sense of the damage that it's already causing.
And looking beyond the US, what about their assessment of the impact of what's happening in the US on other economies.
Yeah, I mean, this is absolutely something that is going to touch most countries around the world.
I mean, if you look at Mexico, America's neighbor there, you expect to see the largest reversal when it comes to big economies.
They are now expecting the economy to contract by 0 .3 % this year, having previously said they thought it would grow by 1 .4%, that's a huge reversal in fortunes.
Other economies also not faring so well, Canada amongst them, there was a mention of how this could affect emerging economies, in particular caught in the crossfire essentially of what is this huge trade war specifically between China and the US, remember, they account for more than 40 % of global trade.
Any change to that relationship has a knock -on effect for everyone else and that really is the sobering message of this report, is that it will affect global growth in many countries, including the UK, where you are.
I'd like to bring in Fiona Cincozza now, Senior Market Analyst at Citi Index, lots goin' on today for us to focus on Fiona, but just specifically on this, any market reaction to what we've heard from the IMF in the last hour or so?
So there hasn't been sort of a knee -jerk reaction and that's because they're leading the environment.
Oh I'm sorry we seem to have a difficulty with our connection to Fiona, we'll sort that out, come back to her in a second or two.
Let me bring in Kaylin Birch, global economist at the Economist Intelligence Unit, their lead analyst on the US, Kaylin thank you for being with us, just give me your take on what we've heard about the health of the US economy, in particular from the IMF?
I guess this all rings true to us.
We see the US as being in a particularly vulnerable position, and that's actually quite a unique condition for the US economy, which has weathered a lot of the recent crises we've seen, including the pandemic, much more easily than other economies, to a certain extent, because it has the reserve currency and it sits at the juncture of the global international system.
This time, it's all homegrown risks and homegrown shocks to the US and global economy and we're going to see a much heavier hit we think for the US and elsewhere.
I thought that they wanted to make really clear that the US could choose to change course and that would have an almost immediate impact.
I don't suppose it's going to happen but I just thought was an interesting thing for the IMF to point out.
Yeah I think a lot of economists and data scientists are waiting to wake up from the current nightmare but I think I mean broadly speaking the market reaction we've seen has been very interesting.
Even in recent weeks, we saw kind of rapid kneejerk market sell -offs when, for example, there was a rumor, which turned out to be unfounded, that Trump might consider a pause on the so -called reciprocal tariffs, which he then actually did implement days later, but by then the market didn't have that kneejerk function in place.
I think we, to a certain extent, have gotten used to the idea that we're going to see a slower economic performance from US and that's gotten a bit baked in.
Conversely, what I would say is actually we're seeing more softness on the investment side than on the consumption side.
I think the consumption slowdown which is the hugest kind of component of US GDP has yet to really hit and that's going to be much more uncomfortable when it does.
They say there's not going to be a recession in the US, why have they concluded that and do you agree?
I personally I don't agree, I think we're inching closer to a recession and it's largely hinging on that consumer picture.
We have a big hit to investment baked in because of that economic policy uncertainty element that they mentioned and that Michelle covered.
It's just very difficult to make long -term plans or plan to invest capital when there's so much uncertainty about the outlook.
But consumers again we haven't seen the hit to personal consumption yet and again that's close to 70 percent of US GDP so when the impact of tariffs starts to become clearer in US domestic prices I think we'll see a heavier hit to the rate of consumption that we would otherwise and we could get into what we're expecting now will probably be a mild recession but risks very much to the downside with a situation that could get worse quite quickly.
Say with me Kaylin, I just want to hear a bit more from Pierre Olivier Gorinczas from the IMF.
This is what he said.
We were seeing already consumption numbers coming down, we're seeing consumer confidence coming down.
So all of that was already factored in, but we are not seeing a recession in our reference forecast. We are seeing the probability of a recession increasing from about 25 percent back in October to around 40 percent when we assess it now.
Fiona Cincotta is back with a Senior Market Analyst. Sorry about the a problem.
Fiona, you were just telling me that there's not been an instant market reaction to what we've heard today.
Yes, that's right. So, I think the market has been pricing in over a period of time, these expectations of slower growth particularly, sort of, you know, in the US and in other countries as well globally.
So, I mean, you know, if we have a look at how much equities have fallen over recent weeks.
It's significant. The S &P 500 is still down around 15 % from its recent all -time highs.
The US dollar is still trading at around three year lows.
So also we've seen action in prices today.
I think we've seen large drops over the past couple of weeks.
Okay. More from Fiona on the way very shortly.
Kaelyn Birch from The Economist Intelligence Unit.
Still with me. Interesting the ripple effect isn't it on on so many other economies whether it's China or Canada or Mexico or the UK all these countries have their own things going on as well but as you say that the US economy has been proven to be so central to what happens with everybody else.
Yes absolutely and and we will see the impact of that this year so we've lowered our growth forecast as well as feels inevitable to do and we have particularly hard hits in the rest of North America, as you noted Mexico and Canada as well, because all of this economic uncertainty when it comes to trade policy with this, what was up until very recently kind of a stalwart trade bloc with very deep ties now with metals tariffs and other industrial goods, auto, etc. That means a particularly difficult outlook for this region.
But again, they're downward revisions in every region.
Thank you very much indeed, Kaelin.
Good to have your company, Kaelin Birch, with us live.
More with Fiona Sincotta in a moment or two...
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We've just turned to another story today, India and the US.
So they're making progress in negotiating a trade deal after a meeting between the Indian Prime Minister Narendra Modi and the US Vice President, J .D.
Vance in Delhi. The US is India's largest trading partner and the biggest buyer of its exports.
J .D. Vance currently there on a four day trip with his wife and family and he spoke about the two economies at the Rajasthan International Centre earlier.
Now I believe that our nations have much to offer one another and that's why we come to you as partners looking to strengthen our relationship.
Now we're not here to preach that you do things any one particular way.
Too often in the past, Washington approached Prime Minister Modi with an attitude of preachiness or even one of condescension.
prior administration saw India as a source of low -cost Labour on the one hand even as they criticize the Prime Minister's government let's get more on this from dr. Mukesh Aggie president and CEO of a u .s. India strategic partnership forum based in Washington I've just been talking to you Mukesh I asked him why a deal between the US and India is so important the u .s. India trade is around 200 billion dollars and the objective set up by Prime Minister Modi and President Trump in their February meeting was, we need to take this trade to $500 billion.
And more important is that if you want to take this trade deal forward, then you need to have some kind of agreement on non -tariffs issues between the two countries to expedite the target of $500 billion in the next few years itself.
It's very common for countries, leaders who to get on with each other to talk about trade deals but also then very common for them to run into all sorts of difficulties and delays once the negotiating teams get down to the detail of them?
Well yes I agree with that but I think this time it seems different and I'll tell you why because one is both President Trump and Prime Minister Modi set up a timeline which is the fall of this year when President Trump comes to India to conclude the trade deal and both Prime Minister Modi and J .D .Vanz signed a trade reference or protocol to the trade deal so at least people are willing to work within that framework.
Donald Trump's talked a lot about how India specifically has ripped the US off for a long period of time and the high tariffs it's charged on US imports.
Does India accept all that?
Well, he has called India the tariff king and basically the thinking in India is that it has to protect some of its vital resources.
For example, India has 50 % of its labour force on farm, and farm basically produces only 15 % of the GDP of the country.
So that shows that there are subsistence farming and you've got to protect that, so there is a high tariff on that.
In some cases, Trump is right, but in a lot of cases he's wrong.
And we heard yesterday from Beijing a warning to say, don't go doing trade deals with the US that in the end come at China's expense?
That is exactly what seems to be happening here.
Is India worried about that?
No I don't think India is worried about that.
India has had a dispute with China on its border which is 3 ,000 kilometer long.
They've not settled that issue.
And the live rivalry between the two countries continues itself.
So India looks at the United States not just as a trade partner, but as a geopolitical partner.
So India will do what it needs to do for own interest and it intrust dictates that it makes a trade deal with the United States in a very immediate fashion so it can keep on exporting and create more jobs in India.
And just one final thought the specific areas of agriculture and fishing likely to be where the sticking points are stickiest?
Tell me why? As I mentioned earlier, when you look at the farmers in India India on the average have one hectare of land per farm itself.
And 50 % of the population works on the farm producing only 15 % of the GDP.
So India needs to protect that.
But more important is India also does not have any grains in the country itself.
So it does not want any genetically modified products coming into the country.
And it also does not want any kind of meat coming in the country which has had animal feed into it because of religious implication also so I think from that perspective the red line is hey you got to protect the agriculture such as maize, rice and wheat and some of the dairy products and I think that red line has been accepted by the US, so we feel that both sides agree on a broader framework.
This is Dr Mukesh Aggie, the president and CEO of US India strategic partnership with me from Washington.
Fiona Sinquota is a senior market analyst from City Index. Even before we heard from the IMF, there was quite a lot going on today.
Fiona, another day when we say record gold prices.
Yes, indeed. It seems to be coming a bit short, doesn't it.
I mean gold is up 26 % this year.
So that's on a really strong gains we've seen And in just a few short months, it reached a record high, just shy of $3 ,500 per ounce.
And this is basically the uncertainty from Trump's trade tariff.
What the policies will mean as far as global growth is concerned, as far as inflation is concerned.
But then also yesterday, we had a verbal attack from Trump on Federal Reserve Chair, Jerome Powell, which also rattled the market, raising some concerns over the Fed's independence.
But all of that combined together means that central banks and investors just keep going for gold.
Let's talk about Roche, big pharmaceutical company.
This will be music to the White House's ears because they've talked about investing tens of billions of dollars in the US in manufacturing.
Yes, this is right.
This is exactly what Trump wants to be hearing.
So they said they'll invest 50 billion in the US over the next five years basically looking to expand and upgrade manufacturing distribution capabilities in Kentucky, Indiana, Origin, California, and interestingly, they are joining viable drugmakers who, the Swiss rival Novartis, who also earlier this month laid out plans to invest $23 billion in the US to ensure that drugs are made in America.
So this is exactly what the Trump for when it was looking to move manufacturing back to the US.
Another thing we talk about a lot and have done in recent weeks is the performance of Tesla, with Elon Musk's involvement in the US administration and the reaction of the demographic of people who like to buy Teslas to that.
We're going to get some results from them later.
That's right. So they're going to report their Q1 earnings after the close today.
Now, these earnings.
Come as the share prices down around 44 % so far this year and its worst quarterly share performance in 2022.
Basically, as the brand, the market, threats over this ongoing brand erosion, as CEO, Elon Musk, seems to have many distractions outside of Tesla.
Particularly with his role with the Trump administration and deliveries were short of expectations.
They were down 13 % from the same period, a year earlier expectations of a revenue of 21 .24 billion so we will see what that brings.
Fiona, thank you very much Fiona Cincotta, Senior Market Analyst at City Index. Back to what we've heard from the IMF in just a sec.
First of all, if you've got to spare $33 million, you fancy buying a private island with it.
There's one for sale in the UK, it's called a SEAH, it has a 380 acre private estate.
It's well known for musicians writing and recording there, including Stormzy who used it to write his album This Is What I mean?
Oh, this is clean. This is clean.
This is what I mean.
Simon Padding is the director of fine and country, the real estate agents who are selling the island.
It's a beautiful, tranquil piece of England really, which is obviously so accessible to London but it's fabulous countryside, it's got a real charm and warmth to it.
I mean, can't help but feel refreshed even in a couple of hour visit to the island, it's one of those places that just sort of gets you somehow.
I mean it's clearly got UK weather so there'll be, you know, islands in the Caribbean and the world over that do better on the weather stakes.
So is it basically its commutability to London that makes it appealing?
It's commutability to London I think it's its charm.
It's a lovely place to escape to I think, if you were looking at a break in the UK and you were thinking you know somewhere like the Cotswolds, or you know what the sort of charming countryside places within Britain, this is very much right up there with that, and yet obviously so accessible.
Why do musicians love it?
I know it's got a state -of -the -art recording studio when you know it's going to be part of the answer but there must be other reasons as well.
Why so many musicians?
Rhianna, Stormzy, all sorts of people have wanted to go there the island has connections with the music industry.
It's a pretty pre -eminent record producer that I think has sort of driven his business connections to focus into that sector, and by default, not with a lot of advertising, but by default through networking, it's kind of established itself as a bit of a celebrity haunt, particularly in the music and film industry.
And it can't be a common thing for someone in your line of work to try and market something like this.
So do you think, well, we'll go down the road of the music connections, because that's likely to be fruitful.
You're right. I mean, it's not every day you get to sell an entire island.
you know, music connections obviously are helpful because it makes it newsworthy, and it gives it interest, but I think the island has a host of variety of different potential uses.
I mean, obviously, continue very much in the vein that it is at the moment.
It would make a great health or fitness -type retreat or spa or that type of arrangements.
It would work with various religious -type institutions could find it useful or, you know, you could look at potentially, you know, farming, golf, football breaks, you know, there's all sorts of opportunities really to expand the use of the island, obviously subject to various consents and what have you, but it is completely self -contained, and that's what makes it so unusual.
Simon Penning, Director of Fine & Country, who are selling this private island for $33 million.
Back to the International Monetary Fund now, cutting its economic growth forecasts for 2025, saying an increase in tariffs from the US and market uncertainty as a result will lead to a significant slowdown around the world.
The US itself given the biggest downgrade, but it's quite a long list of other countries that have been downgraded too.
Our Deputy Economics Editor, Darshini David, is here with me in the studio.
Could have been worse, I suppose, Darshini.
It could have been worse.
But on the other hand, you know, this has been a really tricky few years for the global economy, right?
So nobody needs shock after shock after shock.
And when you look at it on the face of it, you say the IMF isn't predicting a global recession.
and it's not even predicting a US recession.
But it said we're entered a new era on the second of April.
Sounds a bit like Star Wars, and, of course, Star Wars did involve trade wars as well.
But this downgrade, if you tip blow the surface of this, there is something very serious going on.
The IMF has raised its risk alert when it comes to the US economy.
They said there's more than a 1 in 3 chance that the US does go into recession this year.
It was 1 in 4 back in the autumn.
And a lot of that is down to tariffs.
They say, however, that even before that stage you could see the UK's prospects looking a bit gleamier, consumer confidence was falling.
So there was some pre -empting of all of this going on, some apprehension and the same is true for a lot of other economies as well.
But when you add it all up, yeah, we've got this trade iceberg, the IMF isn't quite sure how big, how serious, how painful it's going to be.
There's a lot in this.
I was saying earlier that they very clearly offered a kind of olive branch to the White House and said if you change course then, you know, It could all be so different.
I don't suppose we're going to see that.
I suspect we're going to see Donald Trump say it's all down to the Fed and Jerome Powell on that.
Indeed. And it's interesting when you listen to some of those trade delegations who are anxiously trying to compete deals in the next couple of months, and they're saying, every time we go back, new things are coming up on the negotiating table.
So it doesn't feel like the Trump administration is in any hurry to tear down these extra trade barriers that it's erected.
In fact, talking to some of those previous advisors, they say they want to keep some residual tariffs, regardless of any deals that are struck, to convince firms it's worth investing in the US.
You've got all those things to think about.
And you say, in the meantime, Jay Powell seems to be the pantomime baddie as far as President Trump's concerned.
It's easy to see where the political messaging comes from.
You can basically say the IMF is part of the fake news media.
It's part of the establishment.
They're all against us.
You can hear all of that.
But in the end, the economics have to work, right?
The economics have to work and you remember here in the UK.
We had the government saying how do we measure growth?
Well, are people going to feel better off?
And it sounds very trite, but the end of the day, that's how Americans will judge their president.
And they are in the firing line when it comes to these tariffs and this trade war.
So ultimately, whatever numbers on a spreadsheet say, they may be the judge and juries and all of this.
And it could be quite painful for them in the meantime.
Is there any chance at all it does work?
I mean, one objective was the idea of getting companies like Roche investing tens of billions, so there are small successes.
There are pockets of successes.
But when you look at the price, history tells us the price American consumers have to pay for that kind of relocation is extremely high when it comes to tariffs.
Is that worthwhile?
Is there a better way of doing things?
That is the question you've got to ask about all of this.
Darshini, thank you very much. Indeed, so in the last couple of hours the IMF has warned that among advanced economies, the US is going to be the hardest hit by a significant slow down in growth now predicted around the world and they say it's largely driven by President Trump's tariff policy.
There's more of course online at bbc .com slash news but for now from me Andrew Peach and the whole team on World Business Report thanks for being with us on the BBC World Service!
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