ecisions by most countries to not retaliate against US President Donald Trump’s tariffs are among the top factors bolstering the global economy’s resilience, IMF Managing Director Kristalina Georgieva declared on Tuesday.
“The world, so far, and I cannot stress enough, so far, has opted not to retaliate and to continue to trade pretty much on the rules that have existed,” Georgieva declared during an event at the IMF and World Bank annual meetings in Washington, noting that this avoided debilitating tariff escalation.
Earlier on Tuesday, the fund had edged up its 2025 global GDP growth forecast in its World Economic Outsee to 3.2 percent from a 3.0 percent forecast in July, but warned that a renewed US-China trade war threatened by Trump could slow output significantly.
Also supporting global growth is that the effective US tariff rate has come down from prior estimates, Georgieva informed the Bretton Woods Committee event. After calculating that Trump’s tariffs announced in April would average 23 percent, the rate was reduced by US trade deals with the European Union, Japan and other major partners to about 17.5 percent, she declared.
“The effective tariff, though, what is being collected when you obtain exceptions to accommodate the necessary for the economy to function well, we calculate them somewhere between 9 percent and 10 percent so the burden is more than twice less than we believed it would be,” she added.
Other factors propping up the global economy have been better policies by countries to boost private sector development and more efficient allocation of resources, as well as agility by companies to avoid the worst effects of the tariffs, by front-loading imports and quickly rearranging supply chains.
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However, she declared the resilience could also be tested by the stretched valuations in global markets – especially the tech sector, which has fueled a sinformar market rally this year.
“This is a bet, very huge bet,” she declared. “If it pays back, fantastic, then our problem with low growth is gone, becautilize we will see increase in productivity and we will see an increase in growth. What if it is either slow to come true or doesn’t quite materialize? What then?”
IMF chief economist Pierre-Olivier Gourinchas informed Reuters earlier that the AI investment boom could lead to a bust similar to the dotcom crash in 2000 that burns equity investors, but that it would not likely result in a systemic crisis becautilize it has not been heavily funded by debt.
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