The International Monetary Fund has issued a warning about potential global economic impacts from upcoming US policies under President-elect Donald Trump.
According to the IMF, proposed tariffs could escalate trade tensions, reduce investment, affect market pricing, and disrupt established supply chains. While acknowledging that tariffs, tax cuts, and deregulation might boost US economic performance initially, the organization cautions this could lead to an inflationary boom followed by a downturn, potentially weakening the reliability of US Treasury bonds as a safe investment.
The IMF projects global growth at 3.3% for both 2025 and 2026, below the historical average of 3.7%. The 2025 forecast remains largely stable from previous predictions, with higher anticipated US growth offsetting lower growth expectations in other major economies.
For the UK, the IMF projects 1.6% economic growth in 2025, slightly up from its October prediction of 1.5%, though recent figures suggest weaker growth than previously forecast. Chancellor Rachel Reeves highlighted that the UK is “forecast to be the fastest growing major European economy over the next two years and the only G7 economy, apart from the US, to have its growth forecast upgraded this year.”
Trump’s upcoming presidency features prominently in the IMF’s risk assessment. His previous term saw a trade war with China and reciprocal tariffs with the EU. Current proposals include a 10% tariff on global imports, 25% duties on Canadian and Mexican imports, and 60% tariffs on Chinese goods. He has also threatened 100% tariffs on the BRICS bloc should they develop a competing currency to the US dollar.
The IMF warns that while these measures might temporarily boost the US economy, they could trigger an inflationary boom followed by a downturn that might “weaken the role of US Treasuries as the global safe asset.” Reduced business regulations could lead to dollar strengthening that drains capital from emerging economies. The proposed deportation of illegal immigrants could permanently reduce economic potential while increasing inflation.
IMF chief economist Pierre-Olivier Gourinchas noted that “tremendous uncertainty” about Trump’s future policies is already affecting global stock markets. The World Bank has similarly warned about tariffs impacting trade and global growth, predicting 2.7% global growth in 2025 – the weakest since 2019, excluding the Covid pandemic contraction.
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