The threat of Trump’s tariffs will increase uncertainty for the global economy, the IMF warned

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The IMF has warned that turmoil around Donald Trump’s threat to impose trade tariffs will raise long-term borrowing costs and add to pressure on the global economy in 2025.

IMF Managing Director speaking to reporters in Washington on Friday Kristalina Georgieva In the year Global economic policy faces “great uncertainty” in 2025, particularly around trade policy in the world’s largest economy.

“That uncertainty is expressed globally by high long-term interest rates,” Georgieva said, although short-term interest rates have fallen.

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

He also threatened to hit Canada and Mexico – now the largest trading partner of the United States – with 25 percent tariffs and an additional 10 percent on Chinese goods, which could herald the start of a new global trade war.

U.S. allies are nervously waiting to see if the president-elect intends to immediately implement blanket tariffs when he takes office on Jan. 20, or if he will take a more measured approach targeting specific sectors.

With trade policy, Georgieva said there is “great interest globally” in the upcoming Trump administration’s broad economic policy choices. including the tax and regulatory agenda.

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

Georgieva previewed some of the IMF’s future world economic outlook for 2025, to be published next week, which sees global growth continuing “steadily”.

But overall, US economic growth is performing “better than we expected,” while the European Union has been “somewhat stagnant,” she said.

China faces deflationary pressures and domestic demand challenges, while low-income countries are “in a position to be adversely affected by any new shocks,” she added.

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

“Fiscal policy has proven to be very difficult to act quickly on the basis of public opinion, and this brings us to what our main challenge in the fund is – and that is solving this low growth and high credit problem,” she said.

She added that with US inflation moving closer to the Federal Reserve’s target and new data showing a strong labor market, the Fed could wait for more data before making further rate cuts.