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Tariffs

Global Economy Performs Better Than Expected Amid Trade Policy Upheaval

Strategic Insights

— 1 min read

The global economy is experiencing better-than-expected performance, despite a tumultuous upheaval in U.S. trade policy, according to the International Monetary Fund. However, President Donald Trump's sweeping tariffs are beginning to erode growth prospects for the future. The IMF's latest forecast projects global growth at an annual rate of 3.2 percent, up 0.2 percentage points from the previous forecast and 0.4 points higher than the April estimate. This rate is a slight slowdown from last year's performance and falls short of the pre-pandemic annual average of 3.7 percent.

Key Takeaways:

  • The IMF's latest forecast projects global growth at an annual rate of 3.2 percent, with a slight slowdown from last year's performance.
  • The global economy's growth is attributed to a combination of factors, including the impact of Trump's tariff policy, the passing of trade deals, and the rush of imports before new taxes took effect.
  • The IMF estimates that the global economy would slow further to an annual rate of 3.1 percent in 2026, citing potential trade policy uncertainty and financial market volatility.
  • The U.S. economy is expected to expand by 2 percent this year and 2.1 percent in 2026, with growth being hindered by tariffs and tighter immigration policy, while being pushed forward by loose financial conditions and AI investment.
  • American consumers are expected to bear 55 percent of the tariff burden, with U.S. businesses swallowing 22 percent and foreign exporters paying 18 percent.

Statistics:

  • Global growth this year is projected at an annual rate of 3.2 percent.
  • The global economy's growth is 0.2 percentage points higher than the previous forecast and 0.4 points higher than the April estimate.
  • The U.S. economy is expected to expand by 2 percent this year and 2.1 percent in 2026.
  • Tariffs and tighter immigration policy are holding U.S. growth back, while loose financial conditions and AI investment are pushing it forward.
  • American consumers are expected to bear 55 percent of the tariff burden.
  • U.S. businesses are expected to swallow 22 percent of the tariff burden.
  • Foreign exporters are expected to pay 18 percent of the tariff burden.

Sources:

  • The International Monetary Fund (No source date provided)
  • Pierre-Olivier Gourinchas, IMF's Chief Economist (No source date provided)
  • Goldman Sachs (No source date provided)

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