Japan Sounds Alarm on Global Economy as U.S. Tariffs Hit Growth

Japan has officially downgraded its outlook on the global economy amid intensifying concerns over the impact of U.S. trade policies. In its May economic report, the Japanese government highlighted a slowdown in global growth, citing the escalating effects of tariffs imposed by the U.S.

The government’s latest report states, “A pick-up in the global economy is moderating with growth stalling in some regions amid uncertainty over U.S. trade policy.” This marks a shift from April, when the outlook remained optimistic about global growth trends.

Notably, the assessment for the U.S. economy was revised downward for the first time in nearly three years. Japan now sees American economic expansion as “moderating,” indicating that trade tensions are beginning to weigh heavily on key global markets.

Japan’s domestic economy, however, is still considered to be in a phase of “moderate recovery,” supported by improvements in employment and household income. But the report warns that downside risks are increasing—primarily due to U.S. tariffs, rising consumer prices, and potential market volatility.

“The effects of continued price rises on household sentiment and consumption are also downside risks,” the report stated.

The downgrade comes just weeks after the International Monetary Fund slashed its 2025 global growth forecast from 3.3% to 2.8%, attributing the drop to the disruptive effects of tariffs on trade and investment. The IMF noted that supply chain disruptions and market uncertainty are dampening global demand.

Despite a temporary ceasefire in the trade war between the U.S. and China, Japan is feeling the impact firsthand. Its economy contracted at an annualized rate of 0.7% in Q1 2025, the first decline in a year. Moreover, exports to the U.S. dropped significantly in April, underlining the fragile nature of Japan’s recovery.

The Japanese government’s latest report underscores growing global unease about the trajectory of U.S. economic policy and its ripple effects on international markets. As trade tensions persist, policymakers around the world are bracing for further instability.