(18 July 2024 – United States) The International Monetary Fund (IMF) cautioned a new spate of tariffs could stoke higher inflation and force central banks to set elevated interest rates.
Donald Trump has proposed a 10 percent tariff on all US goods imports and a 60 percent tariff on imports from China as part of his campaign to regain the White House following a 13 July assassination attempt in Pennsylvania. Economists believe that would push US inflation higher in 2025.
The IMF’s latest outlook for the global economy warns borrowing costs could be pushed higher by national elections that may lead to a surge in already high levels of government borrowing. The IMF left its forecast for world economic growth unchanged at 3.2 percent for 2024 while increasing its forecast for 2025 to 3.3 percent from 3.2 percent.
“Economic activity has shown resilience through early 2024, supported by robust private consumption in key economies. Despite challenges such as persistent services inflation and trade tension, the global economy is expected to grow steadily at 3.2 percent in 2024 and 3.3 percent in 2025 and this is consistent with our April forecast. That said, the momentum of global disinflation is slowing due to persistent services inflation” said IMF Deputy Chief of the World Economic Studies Division, Jean-Marc Natal.
“Overall, risk to the outlook remain balanced, but near-term risks have become more prominent. Upside risk to inflation stemmed from a lack of progress on services disinflation, renewed trade tensions ,and geopolitical uncertainties. These risks may result in higher for even longer interest rates, which in turn increases external fiscal and financial risks. Additionally, significant swings in economic policy around elections could lead to fiscal slippages and heightened protectionism. By contrast, policies that promote multilateralism and a faster implementation of structural reforms could boost supply gains, productivity and growth with positive spillovers worldwide”