Trump’s tariff threat increases global economic instability, IMF warns

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The IMF has warned that the jitters surrounding Donald Trump’s threat to raise trade tariffs are raising long-term borrowing costs and will add to the pressures facing the global economy in 2025.

Speaking to reporters in Washington on Friday, the managing director of the IMF Kristalina Georgieva said that global economic policy faces “significant uncertainty” in 2025, particularly in relation to the trade policy of the world’s major economies.

“That uncertainty is actually reflected globally in higher long-term rates,” Georgieva said, although she noted that short-term rates have fallen.

Donald Trump returned to the White House promising to apply higher tariffs on imports from its trading partners, including tariffs of 20 percent on all goods.

He also threatened to hit Canada and Mexico – which are now the largest trading partners of the US – with tariffs of 25 percent, and apply a 10 percent tariff on Chinese goods, which is an opportunity to herald the start of a new era of global trade wars.

America’s allies are anxiously waiting to see if the president-elect has the will to implement blanket tariffs immediately upon his inauguration on January 20, or if he will hold off and take a more conservative approach. more limited that hits certain parts.

Along with trade policy, Georgieva said there is “tremendous interest around the world” in the incoming Trump administration’s broader economic policy options, including its tax and regulatory agenda.

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

Georgieva reviewed some of the IMF’s upcoming World Economic Outlook 2025, which will be published next week, showing that global growth “remains stable”.

However, overall, US economic growth was “much better than we expected”, while the EU “was still in decline”, he said.

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

By 2025, countries will still be facing the legacy of high borrowing during the Covid era, and will need to consolidate funds to put public debt “on a more sustainable path”, he said.

“It has proven very difficult for monetary policy to act quickly, in terms of public opinion, and that brings us to what is our main challenge in the fund – and dealing with this low growth, credit big,” he said.

He added that as US inflation approaches the Federal Reserve’s target and new data show a strong labor market, the Fed may wait for more data before cutting rates.