(14 October 2025 – Global) The International Monetary Fund (IMF) warns that the global economy is flashing signs of strain as a direct result of US trade policy.
The dip in growth expectations is directly linked to US President Donald Trump’s global trade war, conducted via sweeping tariffs and protectionism. The conflict escalated this week as China imposed retaliatory restrictions on rare earths. A silver lining does exist insofar as economic growth is not as bad as expected, or at least not yet Bloomberg reports.
The global economy is expected to expand by 3.2 percent this year, up from three percent predicted in Q3 2025 before sliding modestly to 3.1 percent in 2026 as the IMF notes increasing signs that the impact of high levies is starting to be felt.
The upgraded forecast is primarily attributed to a lift in activity as importers and exporters raced to stockpile inventory in anticipation of elevated tariffs in addition to a weaker US Dollar that stimulated trade in the short term.
Governments must rein in aggressive borrowing by finding ways to reduce record fiscal deficits, particularly in Europe, given the additional costs linked to aging populations, increased defence investment, energy security and ESG measures.
“It’s not as bad as we feared. But it’s worse than we anticipated a year ago and worse than we need. The calculus of post-pandemic debt sustainability is complicated by elevated debt ratios, worsening primary balances, higher interest rates and a weakening growth outlook” commented IMF Chief Economist Pierre-Olivier Gourinchas.