Threat of Trump tariffs adds to global economic uncertainty, IMF warns

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The International Monetary Fund has warned that jitters over Donald Trump’s threat to impose trade tariffs are pushing up longer-term borrowing costs and adding to pressures on the global economy in 2025.

Executive Director of the IMF in a conversation with journalists in Washington on Friday Kristalina Georgieva said that global economic policy faced “quite a lot of uncertainty” in 2025, particularly around the trade policy of the world’s largest economy.

“That uncertainty is actually being expressed globally through higher long-term interest rates,” Georgieva said, although she noted that short-term interest rates have declined.

Donald Trump returned to the White House vowing to impose steep tariffs on US imports from his trading partners, including 20 percent tariffs on all goods.

He also threatened to hit Canada and Mexico, now the US’s biggest trading partners, with 25 percent tariffs and an additional 10 percent on Chinese goods, potentially heralding the start of a new era of global trade wars.

US allies are nervously waiting to see if the president-elect has the appetite to immediately implement comprehensive tariffs when he takes office on January 20, or if he will hold off and take a more measured approach that would hit specific sectors.

Along with trade policy, Georgieva said there is “a lot of interest globally” in the incoming Trump administration’s broader economic policy choices, including taxes and its deregulatory agenda.

The impact of trade policy will be felt especially by countries that are “more integrated into the global supply chain,” Georgieva said, and in Asia.

Georgieva previewed part of the IMF’s World Economic Outlook for 2025, to be released next week, which shows global growth “remains stable”.

However, in the overall picture, US economic growth was “a bit better than we expected”, while the EU was “slightly stalling”, he said.

China faced deflationary pressures and domestic demand challenges, while low-income countries “were in a position where any new shocks could affect them quite negatively,” he added.

In 2025, countries will still face the legacy of high borrowing during Covid and will need to implement fiscal consolidation to put public debt “on a more sustainable path”.

“It has proven very difficult for fiscal policy to act quickly given public sentiment, and that leads us to what is our main challenge at the fund, and that is tackling this low-growth, high-debt mystery,” he said. he

He added that with U.S. inflation moving toward the Federal Reserve’s target and new data showing a robust jobs market, the Fed may wait for more data before cutting rates further.