The International Monetary Fund has revised its global and U.S. economic growth projections upward for 2025, citing less immediate disruption from trade tariffs than initially feared. In its latest World Economic Outlook, the IMF forecasts U.S. economic expansion at 2% this year, up from 1.9% in July and 1.8% in April. For 2026, the U.S. is expected to grow by 2.1%, a slight increase from prior estimates. Global growth is now projected at 3.2% for 2025, up from 3% in July, while the 2026 outlook remains unchanged at 3.1%.
The revision reflects a partial recovery from earlier pessimism. In January, before the Trump administration’s tariff measures took effect, the IMF had forecast global growth at 3.3%. While current figures are close to that level, the organization warns that risks remain due to ongoing trade tensions. IMF chief economist Pierre-Olivier Gourinchas emphasized that tariff policies and threats continue to create uncertainty, dampening investment and weighing on global economic momentum.
Despite these concerns, several factors have contributed to economic resilience. One key driver has been a surge in artificial intelligence-related investment, particularly in large-scale data centers and high-performance computing. This tech-driven capital expansion has helped offset trade-related drag in the U.S. economy. Gourinchas noted parallels between the current AI investment wave and the dot-com boom of the late 1990s, cautioning that a potential financial bubble could destabilize growth if it bursts.
Stocks of AI-focused firms like AMD and Oracle, which announced a deeper partnership recently, have risen about 80% this year. These gains have boosted household wealth and supported consumer spending, further fueling economic activity. However, sustained investment and spending could prompt central banks to raise interest rates over time to manage inflationary pressures.
The IMF attributes the limited short-term impact of tariffs to several temporary factors. Many trade exemptions and bilateral deals reduced the initial shock. Most countries refrained from retaliatory measures, preserving global trade flows. Additionally, U.S. businesses front-loaded imports before tariffs took effect, allowing them to delay price increases.
Still, the IMF cautions that these are short-term buffers rather than signs of structural strength. Over time, importers and retailers—who have absorbed most of the tariff costs so far—are likely to pass them on to consumers. Core inflation, excluding food and energy, has already edged up to 2.9%, according to the Federal Reserve’s preferred measure, from 2.7% a year ago.
Labor market trends also reflect caution. Hiring has nearly stalled, possibly due to business uncertainty stemming from trade policy volatility. Private-sector forecasts are more subdued: the National Association for Business Economics predicts 1.8% U.S. growth in 2025 and 1.7% in 2026, with two-thirds of surveyed economists believing tariffs are slowing growth by up to half a percentage point.
China has managed the tariff impact by redirecting exports to Europe and Asia, supported by a weaker currency that enhances export competitiveness. The IMF maintains its growth forecasts for China at 4.8% in 2025 and 4.2% in 2026. However, Gourinchas highlighted growing reliance on exports and persistent challenges in the debt-laden real estate sector, raising sustainability concerns.
In Europe, Germany’s increased defense spending is contributing to regional growth. The IMF now expects the eurozone’s 20 economies to expand by 1.2% in 2025, up from 1% in July, with 2026 growth projected at 1.1%. The organization, representing 191 countries, continues to advocate for policies that promote financial stability, economic growth, and poverty reduction worldwide.
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IMF upgrades U.S. economic outlook as tariffs cause less disruption, for now
WASHINGTON (AP) — The U.S. and global economies will grow a bit more this year than previously forecast as the Trump administration’s tariffs have so far proved less disruptive than expected, the International Monetary Fund said Tuesday, though the agency also said the extensive duties still pose risks. n nThe United States’ economy will expand 2% in 2025, the IMF projected in its influential semi-annual forecast, the World Economic Outlook. That is slightly higher than the 1.9% forecast in the IMF’s last update in July and 1.8% in April. The U.S. should grow 2.1% next year, also just one-tenth of a percent faster than its previous projection, the IMF said. n nThe global economy, meanwhile, will grow 3.2% this year, up from a 3% estimate in July, the IMF forecast, and 3.1% in 2026, the same as its previous estimate. n nThe figures represent a bit of a round-trip for the IMF: In January, before President Donald Trump began imposing tariffs, it had forecast global growth of 3.3%, only slightly higher than its newest estimate. While the U.S. and world economies have fared better than expected, it’s too soon to say they are fully in the clear, the IMF said, as Trump has continued to make tariff threats and it can take time for changes in international trade patterns to play out. n nOn Friday, for example, Trump threatened to slap 100% duties on all imports from China, which caused a sharp fall in the stock market. n nIMF chief economist Pierre-Olivier Gourinchas said at a news conference that the import taxes and ongoing threats to impose more duties have created ongoing uncertainty for many businesses and it’s weighing on the world economy. n n“The tariff shock is here, and it is further dimming already weak growth prospects,” he said. n nGourinchas also said that a burst of investment in artificial intelligence, in the form of huge data centers and extensive computing power, has helped offset the drag from trade and boosting the U.S. economy. Yet if a financial market bubble formed and then burst, it could sharply slow business investment and consumer spending, he said. n n“There are echoes in the current tech investment surge of the dot-com boom of the late 1990s,” he said. “It was the Internet then, it is AI now.” n nShares of two companies active in the AI sector, AMD and Oracle, which announced an expanding partnership Tuesday, have seen their shares rise 80% this year. n nGains in AI-related stock values have lifted Americans’ wealth and fueled consumer spending, Gourinchas said, just as companies are ramping up their investments in advanced computer chips and building data centers. Hotter spending and investment could push central banks to raise interest rates over time, he said. n nGourinchas also offered several reasons the U.S. and global economies have remained resilient after the widespread imposition of tariffs earlier this year. n n“First and foremost, the tariff shock itself is smaller than initially feared, with many trade deals and exemptions,” he said. “Most countries also refrained from retaliation, keeping the trading system open. And the private sector also proved agile, front-loading imports and re-routing supply chains.” n nBy front-loading imports, many U.S. companies were able to stock up on goods before the duties took effect, enabling them to avoid or delay price increases. n nYet many of those factors only reflect “temporary relief, rather than underlying strength in economic fundamentals,” the IMF’s report said. n nREAD MORE: China refuses to give in to Trump’s tariff threat n nThe IMF also said that import price data in the U.S. shows that so far importers and retailers are paying most of the tariffs, not overseas companies, as many Trump administration officials have predicted. Over time, those firms are likely to pass on more of the price hikes to consumers, the report said. n nThere are signs that some downsides of the higher tariffs are starting to emerge, the IMF outlook said. Core inflation, which excludes the volatile food and energy categories, has ticked up to 2.9%, according to the Federal Reserve’s preferred measure, up from 2.7% a year ago. Hiring has ground to nearly a halt, which could partly reflect a more cautious approach by many firms in the wake of the uncertainty created by the higher tariffs. n nThe IMF’s forecasts are modestly more optimistic than many private-sector economists’ expectations. The National Association for Business Economics, a group of academic and business economists, on Monday forecast that the U.S. would grow just 1.8% this year and 1.7% in 2026. n nNearly two-thirds of the economists surveyed by the NABE said they think the administration’s duties are nevertheless slowing growth, by up to a half-percentage point. n nChina, meanwhile, has weathered the hit from U.S. tariffs by sending more of its goods to Europe and Asia, rather than the United States, the IMF said. Its currency has depreciated, which has made its exports cheaper. The IMF is forecasting that China’s economy will expand 4.8% this year and 4.2% in 2026, the same as in July. n nGourinchas said that China’s economy has grown increasingly dependent on exports, while its real estate sector continues to struggle under heavy debt loads. n n“It is increasingly hard to see how this could be sustained,” he added. n nIn Europe, Germany is bolstering growth by increasing government spending to build up its military, Gourinchas said. The IMF now expects the 20 countries that use the euro to grow 1.2% this year, up from a 1% forecast in July, and 1.1% next year, the same as three months ago. n nThe IMF is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty.