IMF chief says lack of retaliation against Trump tariffs aiding global growth
Written by: Karin Strohecker and David Lawder
WASHINGTON (Reuters) – The decision of most countries not to retaliate against U.S. President Donald Trump’s tariffs is among the most important factors enhancing the resilience of the global economy, IMF Managing Director Kristalina Georgieva said on Tuesday.
Speaking at an event at the IMF and World Bank’s annual meetings in Washington, Georgieva said: “The world has so far, and I cannot emphasize this enough, chosen so far not to retaliate and to continue trading according to existing rules.” He said this prevented a debilitating tariff increase.
Earlier on Tuesday, the fund raised its 2025 global GDP growth forecast to 3.2% in its World Economic Outlook report, from a 3.0% forecast in July, but warned that a new US-China trade war threatened by Trump could significantly slow output.
In her speech at the Bretton Woods Committee event, Georgieva said that another thing that supports global growth is the decrease in the effective US customs duty rate compared to previous estimates. After calculating that Trump’s tariffs announced in April would average 23 percent, he said that rate had been reduced to about 17.5 percent because of trade deals the United States had with the European Union, Japan and other major partners.
“However, when you take exceptions to meet the need for the economy to function well, we calculate the effective tariff collected at between 9% and 10%, so the burden is two times less than we thought,” he added.
Other factors supporting the global economy have been countries’ better policies to boost private sector development and more efficient allocation of resources, as well as the agility of companies to avoid the worst impacts of tariffs by front-loading imports and quickly realigning supply chains.
However, he said resilience could also be tested by stretched valuations in global markets, particularly in the technology sector, which has led to a strong market rally this year.
“It’s a bet, a very big bet,” he said. “If it pays off, fantastic, then our problem with low growth will disappear, because we will see an increase in productivity and we will see an increase in growth. But what if it happens gradually or not fully. What then?”
IMF chief economist Pierre-Olivier Gourinchas told Reuters earlier that the surge in AI investment could lead to a crash similar to the dotcom crash that burned stock investors in 2000, but that it would not likely result in a systemic crisis because it was not financed by debt.
(Reporting by David Lawder and Karin Strohecker, edited by Lincoln Feast.)
