US tariffs will weaken global economy, but recession unlikely: IMF

A wave of new tariffs and trade barriers, primarily being put in place by US President Donald Trump, will weaken the global economy, but a recession is not likely, International Monetary Fund (IMF) managing director Kristalina Georgieva said on Thursday.

The IMF will significantly lower its growth projections due to rising trade tensions and increasing fragmentation in the global economy, Georgieva said, adding that the upcoming World Economic Outlook, which will be released next week, will reflect a downgrade in global growth forecasts.

“We will quantify these costs in our new World Economic Outlook,” she said, noting that while a recession is not expected, growth will slow and inflation will rise in several major economies.

The new tariffs and trade barriers have contributed to what Georgieva described as a “boiling pot” of global trade disruption, with governments shifting toward regional or ideologically aligned partnerships, further eroding trust in multilateral systems.

The IMF warned that the global trading system is undergoing a structural shift and testing the resilience of the world economy.

“Trade distortions—tariff and non-tariff barriers—have fed negative perceptions of a multilateral system seen to have failed to deliver a level playing field,” Georgieva said.

She added that this view has led some countries to feel disadvantaged, fanning the concerns of unfair competition.

Increased import duties and other protectionist policies have also increased volatility in financial markets, especially in the US.

Wall Street has experienced frequent and sharp fluctuations as investors react to shifting trade policies and tariff announcements.

According to Georgieva, the uncertainty created by these policies is costly, particularly due to the complex nature of modern supply chains, which span multiple countries.

Although the IMF’s most recent projections in January had forecast global growth to rise from 3.2% in 2024 to 3.3% in 2025 and 2026, those estimates are now expected to be revised downward.

The earlier forecast had also projected global inflation to fall from 5.7% in 2024 to 4.2% this year and 3.5% by 2026. However, those expectations were issued with caution, as the IMF had already identified Trump’s trade and tax policies as potential inflationary risks.

While the Trump administration has occasionally paused or withdrawn tariff threats, the ongoing trade war has continued to affect market stability. Georgieva said that although increased trade barriers may eventually lead to more domestic production, those changes take time and bring short-term economic costs.

The IMF, a 191-nation organization based in Washington, D.C., will release its revised global economic forecast on Tuesday during its Spring Meetings, which are being held in conjunction with the World Bank.