- The IMF held its Spring Meetings in Washington on April 14, delivering its first post-Iran-war assessment of the global economy with growth forecasts marked down across nearly every major region.
- Two distinct shocks are now operating simultaneously: the tariff-driven fragmentation of trade networks that began in 2025, and a supply-side energy price spike driven by the Iran conflict and Hormuz disruption.
- Central banks are caught between the two. Supply-side inflation argues for holding or raising rates; demand weakness from tariffs argues for cutting. The result is paralysis at the ECB, the Fed, and the Bank of England simultaneously.
The International Monetary Fund’s April 2026 World Economic Outlook press briefing, held on April 14 during the Spring Meetings in Washington, described the global economy as “tested again” by a combination of shocks that have arrived in rapid succession. The Iran war, launched in February with US-Israeli operations against Iranian nuclear and military infrastructure, introduced an energy price shock the Fund had not modelled in its October 2025 projections. Layered on top of that is an unresolved tariff dispute between the United States and its major trading partners that has depressed investment and fragmented supply chains across both manufacturing and services sectors.
The Fund’s managing director used the April 14 briefing to call on governments to avoid “adding further trade barriers” to a situation already under strain, and to focus on fiscal consolidation that preserves space for counter-cyclical spending should growth deteriorate further. The message was directed primarily at Washington, which has maintained 25 percent tariffs on imported goods from most trading partners while adding a new levy specifically targeting AI chip imports announced in January 2026.
The stagflation risk
What distinguishes the current situation from the post-COVID inflation episode is the source of the price pressure. In 2022–23, inflation was driven partly by demand stimulus and partly by pandemic-era supply chain shutdowns. The current episode is driven almost entirely by supply-side shocks: the energy price spike from the Iran conflict, and cost-push effects of tariffs on imported inputs. Demand, if anything, is softening — consumer confidence in the eurozone and the United Kingdom has fallen, business investment has slowed, and trade volume data for the first quarter of 2026 showed the sharpest decline in goods trade since the COVID contraction.
The IMF’s concern is that central banks, constrained from cutting by supply-side inflation, will allow a demand slowdown to deepen into something more serious before the inflation picture gives them permission to respond. The parallel tightening stance of the ECB, the Bank of England, and — under the new Warsh chairmanship — the Federal Reserve means there is no major economy providing demand stimulus at a moment when the global economy needs it.
Emerging markets in the crossfire
The effects are sharpest in emerging economies. Countries that import energy and export manufactured goods to the United States face both shocks simultaneously: higher import bills for fuel and higher barriers to their export markets. Currency depreciation against the dollar — which tends to appreciate in periods of global uncertainty — compounds the problem by increasing the cost of dollar-denominated debt service. The IMF’s debt sustainability assessments for sub-Saharan African and South Asian economies have shifted materially negative since February, a pressure that will require coordinated debt-relief discussions the Fund is now calling for before financing gaps widen further.