The International Monetary Fund has warned United States President Donald Trump’s efforts to upend global trade through tariffs were “going to continue hurting” the world economy.
President Trump sparked chaos in global markets when he announced his “Liberation Day” tariffs in April, threatening to impose steep levies on dozens of nations in addition to separate taxes on imported steel and aluminium.
Although the President subsequently delayed the introduction of widespread tariffs, first for 90 days and later until August 1, levies on some products have already begun to impact trade and resulted in negotiations between the US and other major economies in order to limit fallout.
On Tuesday evening, the IMF published its July World Economic Outlook Update, with the organisation’s chief economist, Pierre-Olivier Gourinchas, explaining that while the trade restrictions had produced a short-term boost to global growth concerns remained over their long-term impact.
“The world economy is still hurting, and it’s going to continue hurting with tariffs at that level, even though it’s not as bad as it could have been,” he said.
Mr Gourinchas said a “tremendous amount” of stockpiling, as businesses tried to future-proof ahead of tariffs coming into effect, had created “distortions” in the outlook and driven up forecasted growth.
“That is going to fade away,” he added.
“That’s going to be a drag on economic activity in the second half of the year and into 2026. There is going to be pay-back for that front loading and that’s one of the risks we face.”
While tariffs had not yet hit the levels some economists feared when President Trump made his “Liberation Day” announcement, the IMF still expects the baseline level to remain high in the coming months.
Mr Gourinchas said this was already beginning to have an effect on the US economy, with signs consumer prices were beginning to edge higher.
“The underlying tariff is much higher than it was back in January, February. If that stays, and there are indications that it will stay at a level that is around what we are projecting, that will weigh on growth going forward, contributing to a really lackluster global performance,” he said.
The IMF upped its prediction for global growth in 2025 by 0.2 per cent, bringing it to three per cent, and also increased the growth forecast for 2026 to 3.1 per cent.
Despite the increases, both figures remain short of the 3.3 per cent rate forecast in January’s outlook and well below the pre-pandemic average of 3.7 per cent.
The forecast for world trade was also revised upward for 2025, lifting 0.9 per cent to 2.6 per cent.
However, the IMF slashed its forecast for 2026 by 0.6 per cent, with world trade now expected to reach just 1.9 per cent.
With Reuters.