The head of the International Monetary Fund said Thursday that President Trump’s tariffs will cause economies around the globe this year to experience higher inflation and slower growth — but not a recession.
The comments from IMF managing director Kristalina Georgieva came as she previewed an IMF World Economic Outlook due out next week that will account for the impact of Trump’s tariffs.
That outlook will show that the IMF notably marked down growth but isn’t predicting a global recession. It will also raise inflation forecasts for some countries.
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During a speech Thursday in Washington, D.C., Georgieva warned that the longer uncertainty persists, the larger the cost. Protracted high uncertainty, she added, raises the risk of financial market stress.
Georgieva also warned that the recent depreciation of the dollar and the uptick in bond yields in the US should be taken as a sign of caution.
“Such movements should be taken as a warning,” she said. “Everyone suffers if financial conditions worsen.”
She stressed tariffs, like all taxes, raise revenue at the expense of reducing and shifting activity — and evidence from past episodes suggests higher tariff rates are not paid by trading partners alone.
Importers, Georgieva said, pay some part through lower profits, and consumers pay some part through higher prices. By raising the cost of imported inputs, tariffs act up-front.
“Ultimately, trade is like water: When countries put up obstacles in the form of tariff and nontariff barriers, the flow diverts,” she said. “Some sectors in some countries may be flooded by cheap imports; others may see shortages. Trade goes on, but disruptions incur costs.”
Georgieva noted that uncertainty around tariffs also makes planning difficult and hits along multiple points in global supply chains, underscoring that the cost of one item can be affected by tariffs in dozens of countries.
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At the same time, she said economies face the new challenges from a weaker starting position, with public debt burdens that are much higher than just a few years ago.
She warned that to keep inflation in check, there must be a strong commitment to central bank independence and that central banks must remain credible and agile when setting interest rates.
Next week, representatives from 191 countries will gather in Washington, D.C., to have a dialogue amid a US-led reordering of trade. Georgieva called for countries to preserve open trade and to create a more level playing field.
“In trade policy, the goal must be to secure a settlement among the largest players that preserves openness and delivers a more level playing field — to restart a global trend toward lower tariff rates while also reducing nontariff barriers and distortions,” she said.
“We need a more resilient world economy, not a drift to division.”
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