Surging U.S. tariffs will weaken the global economy and push up inflation this year, according to projections to be released next week by the International Monetary Fund.
The IMF’s Managing Director, Kristalina Georgieva, said Thursday that the Trump administration’s sharp increases in duties have caused global uncertainty to spike. The import taxes will slow global growth, but not cause a worldwide recession, she added. The details of the IMF’s outlook will be issued Tuesday.
The world economy’s resilience is being tested “by the reboot of the global trading system” that threatens to cause turbulence in financial markets, Georgieva said.
That turbulence has been for weeks now, especially on Wall Street, which has experienced wild swings from day-to-day and often times even hour-to-hour.
The IMF chief also echoed some Trump administration concerns. She called on countries to reduce their tariffs and lower other barriers to trade, a process that she said had stalled out in the past decade after making steady progress for many years after World War II.
“Trade distortions — tariff and nontariff barriers — have fed negative perceptions of a multilateral system seen to have failed to deliver a level playing field,” she said. “This feeling of unfairness in some places feeds the narrative: we play by the rules while others game the system without penalty.”
Georgieva added that tariffs cause uncertainty, which can be costly. Due to the complexity of supply chains, the cost of a single item can be affected by tariffs in dozens of countries, she said.
Increased trade barriers also tend to immediately impact growth, and while it can lead to more domestic production, that takes time to implement, she added.
In its most recent projections , the IMF forecast the world economy to grow nominally faster and for inflation to come down, though it warned that outlook was clouded by President Donald Trump’s policies, including tax cuts and increased tariffs on foreign imports.
The Washington-based lending agency said at the time that it expected the world economy to grow 3.3% this year and next, up from 3.2% in 2024.
Global inflation, which had surged after the COVID-19 pandemic disrupted global supply chains and caused shortages and higher prices, was forecast to fall from 5.7% in 2024 to 4.2% this year and 3.5% in 2026.
However, in a blog post that accompanied those projections, the fund’s chief economist, Pierre-Olivier Gourinchas, wrote that the policies Trump has promised to introduce “are likely to push inflation higher in the near term.’’
Those forecasts from January are expected to change — possibly significantly — as Trump’s trade war has particularly with the U.S.’s biggest trade partner, China.
Trump has on many of his tariff threats — leading to more volatility in the stock market — but has been in a tit-for-tat and has shown no sign of backing down. Each time Trump has raised tariffs on China, Beijing has retaliated with tariffs on U.S. imports.
The IMF is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty.
—-
AP Business Writer Matt Ott contributed.
The post US tariffs will weaken global economy and trigger inflation but not a global recession, IMF says appeared first on Associated Press.
