IMF Warns Rising US Tariffs Could Slow Global Growth, Fuel Inflation

The International Monetary Fund will release new projections next week, warning that surging U.S. tariffs are likely to dampen global economic growth and push inflation higher in 2025.

IMF Managing Director Kristalina Georgieva stated on Thursday that the sharp tariff hikes implemented by the Trump administration have significantly heightened global uncertainty. While these trade measures are expected to slow economic momentum worldwide, they are not anticipated to trigger a global recession, she noted. The IMF’s full outlook is scheduled for release on Tuesday.

Georgieva added that the resilience of the global economy is being tested by a fundamental shift in the international trading system, one that’s already fueling volatility in financial markets. That turbulence has been evident in recent weeks, particularly on Wall Street, where markets have seen sharp and frequent swings on a daily—and even hourly—basis.

The IMF chief also acknowledged some concerns raised by the Trump administration, urging countries to cut tariffs and ease other trade barriers. She noted that while global trade liberalization had made steady progress for decades following World War II, that momentum has largely stalled over the past ten years.

Rising Trade Distortion

Georgieva warned that rising trade distortions, through both tariff and non-tariff barriers, are fueling negative perceptions of the multilateral trading system. These perceptions stem from a growing belief that the global system no longer ensures a level playing field. This sense of unfairness feeds a narrative in some countries that while they play by the rules, others game the system without consequences, she said.

She highlighted that tariffs create costly uncertainty. In today’s complex global supply chains, she noted, the price of a single product can be affected by tariffs imposed across numerous countries. While increased trade barriers may eventually stimulate domestic production, such shifts take time, and in the near term, they tend to immediately weigh on economic growth.

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January Outlook

In its January outlook, the IMF projected that the global economy would grow at a modest pace, with inflation expected to ease. The fund forecast global GDP growth at 3.3 per cent for both 2025 and 2026, up slightly from 3.2 per cent in 2024. Global inflation, which spiked following pandemic-era supply disruptions, was expected to decline from 5.7 per cent in 2024 to 4.2 per cent in 2025, and further to 3.5 per cent in 2026.

However, the IMF also cautioned that the outlook remained clouded by US policies under President Donald Trump, particularly tax cuts and rising import tariffs. In a blog post accompanying the January report, IMF Chief Economist Pierre-Olivier Gourinchas warned that the Trump administration’s proposed measures could push inflation higher in the short term.

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