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Your guide to what the 2024 US election means for Washington and the world
The IMF has warned that the jitters surrounding Donald Trump's threat to impose trade tariffs are driving up long-term borrowing costs and will add to the pressure facing the global economy by 2025.
Speaking to reporters in Washington on Friday, the managing director of the IMF Kristalina Georgiaeva He said global economic policy faces “great uncertainty” in 2025, particularly in the trade policy of the largest economies.
“That uncertainty is reflected globally in higher long-term rates,” Georgieva said, although she noted that short-term interest rates have fallen.
Donald Trump returned to the White House promising to apply higher tariffs on US imports from its trading partners, including a blanket 20 percent tariff on all goods.
He also threatened to hit Canada and Mexico – now the largest trading partner of the US – with tariffs of 25 percent, and to apply an additional 10 percent on Chinese goods, which could herald the beginning of a new era of global trade wars.
US partners are anxiously waiting to see if the president-elect is interested in immediately implementing the clothing prices when he is inaugurated as president on January 20, or if he will withdraw and take a more limited approach that hits certain sectors.
Along with trade policy, Georgieva said there is “global interest” in the incoming Trump administration's broader economic policy options, including its tariffs and regulatory agenda.
The impact of the trade policy will be felt especially by countries “more integrated in the global supply chain”, Georgieva said, and in Asia.
Georgieva pointed to some of the IMF's upcoming World Economic Outlook 2025, which will be published next week, showing that global growth is “steady”.
However, in the overall picture, US economic growth was “much better than we expected”, while the EU was “slowly stagnant”, he said.
China faced inflationary pressures and domestic demand challenges, while low-income countries “were in a position where any new shock could have a negative impact,” he added.
By 2025, countries will still face the legacy of heavy borrowing during the Covid era, and will need to implement fiscal consolidation to put public debt “on a sustainable path”, he said.
“It has proven very difficult for monetary policy to act quickly, given public opinion, and that brings us to our biggest challenge in the fund – and dealing with this low growth, high debt problem,” he said.
He added that as US inflation was moving toward the Federal Reserve's target and new data showed a strong labor market, the Fed could wait for more data before cutting rates further.