The International Monetary Fund (IMF) has projected that rising U.S. tariffs will weaken the global economy and increase inflation this year. IMF Managing Director Kristalina Georgieva stated that the Trump administration’s tariff hikes have caused significant global uncertainty. While these tariffs will slow global growth, they are not expected to trigger a worldwide recession. The IMF’s detailed outlook is scheduled for release on Tuesday.
Georgieva noted that the resilience of the world economy is being tested by changes in the global trading system, which could lead to financial market turbulence. This turbulence has already been evident in recent weeks, particularly on Wall Street, where daily and even hourly fluctuations have been observed.
The IMF chief also acknowledged some concerns raised by the Trump administration, urging countries to reduce tariffs and other trade barriers. She emphasized that progress in reducing trade distortions has stalled over the past decade after steady advancements following World War II.
Tariffs create uncertainty, which can be costly due to the complexity of supply chains. Increased trade barriers can immediately impact growth, though they may eventually lead to more domestic production over time.
In its January projections, the IMF forecasted nominal faster global economic growth and a decline in inflation, though it warned that President Donald Trump’s policies, including tax cuts and increased tariffs, clouded this outlook. The Washington-based lending agency expected the world economy to grow by 3.3% this year and next, up from 3.2% in 2024.
Global inflation, which surged after the COVID-19 pandemic disrupted supply chains, is forecast to decrease from 5.7% in 2024 to 4.2% this year and 3.5% in 2026. However, the IMF’s chief economist, Pierre-Olivier Gourinchas, noted that Trump’s policies could push inflation higher in the near term.
As the trade war escalates, particularly with China, these forecasts may change significantly. Trump has paused or pulled back on many tariff threats, leading to stock market volatility, but remains engaged in a tariff battle with China.
The IMF is a 191-nation organization focused on promoting economic growth, financial stability, and reducing global poverty.
— new from AP News