Staff Reporter :
The International Monetary Fund (IMF) has warned that the recent escalation in US tariffs is expected to dampen global economic growth and contribute to higher inflation this year. The projections are due to be officially released in the coming days.
Kristalina Georgieva, Managing Director of the IMF, stated that sharp tariff increases by the Trump administration have heightened global economic uncertainty.
While the resulting trade tensions are unlikely to trigger a global recession, they are expected to hinder growth and contribute to volatility in financial markets.
“The resilience of the global economy is being tested by a reset of the international trading system,” Georgieva remarked, noting the risk of ongoing turbulence across financial markets.
This has already been reflected in recent fluctuations on Wall Street, where markets have experienced pronounced volatility on a near-daily basis.
Georgieva acknowledged concerns raised by the US administration, calling on nations to reduce tariffs and dismantle other trade barriers. She pointed out that progress in liberalising global trade has largely stalled over the past decade, despite decades of advancement following the Second World War.
“Trade distortions – including tariff and non-tariff barriers – have fuelled negative perceptions of a multilateral system that appears to have failed to ensure a level playing field,” she said. “This sense of unfairness in some quarters feeds a narrative that while some nations adhere to the rules, others manipulate the system with impunity.”
The IMF chief further warned that tariffs create damaging uncertainty. Given the complexity of modern global supply chains, the cost of a single item can be influenced by tariff regimes in numerous countries.
Increased trade barriers, she noted, tend to have an immediate adverse effect on economic growth, and although they may eventually incentivise domestic production, such adjustments require time.
In its most recent outlook published in January, the IMF projected a modest acceleration in global economic growth and a decline in inflation. At the time, the Fund forecast global GDP growth of 3.3 per cent for both 2025 and 2026, up slightly from 3.2 per cent in 2024. Inflation was expected to ease from 5.7 per cent in 2024 to 4.2 per cent in 2025, with a further drop to 3.5 per cent by 2026.
However, in a blog accompanying the January forecast, IMF Chief Economist Pierre-Olivier Gourinchas cautioned that former President Trump’s proposed policy agenda – particularly tax cuts and heightened tariffs – could exert upward pressure on inflation in the near term.
Since then, US trade tensions have intensified, particularly in the country’s ongoing dispute with China, its largest trading partner. Although President Trump has intermittently paused or scaled back tariff threats, his administration has engaged in a sustained tit-for-tat tariff conflict with Beijing. China has consistently responded to US tariff hikes with retaliatory duties on American goods.
The IMF, a Washington-based organisation representing 191 member states, works to support global financial stability, foster sustainable economic growth, and reduce poverty worldwide.
