The International Monetary Fund (IMF) has warned that the global economy is expected to slow down and face higher inflation due to disruptions in international trade and increasing “protectionism.” The comprehensive tariffs imposed by US President Donald Trump, aimed at prioritizing domestic production and renegotiating trade deals in favor of the US, have created deep rifts with trade partners, including the European Union and China.
In a speech on Thursday, the managing director of the IMF, Kristalina Georgieva, urged necessary reforms and renewed global cooperation as she presented the IMF’s new report on economic outlook. Financial volatility has significantly increased and the “expensive” uncertainty surrounding trade policy “blows up the coordinate system” said Georgieva, referring to IMF data showing a sharp rise in global unpredictability. She added that the effective US tariff rate has risen to a level “last seen several generations ago.”
Although she did not mention Trump by name, the increase in tariffs is rooted in his administration’s extensive trade measures, including a flat 10% tariff on all imports and much higher rates on Chinese goods, with some products subject to a tariff of up to 145%. In response, China has raised tariffs on all US imports from 84% to 125%, which has been the most significant retaliatory measure so far.
Georgieva’s statements echo the concerns expressed by other leading economists this week, including the heads of the US Federal Reserve and the World Bank, who warned of the harmful effects of Trump’s trade policy.
On Thursday, the European Central Bank cut interest rates, citing “worsening growth prospects” due to escalating tensions in trade. This week, French Prime Minister Francois Bayrou accused Trump of “without warning” initiating a global trade war and criticized him for imposing comprehensive tariffs on rivals and allies alike, effectively nullifying decades of cooperation.
Other EU leaders have also warned that the tariffs harm international trade and threaten economic stability. The President of the European Commission, Ursula von der Leyen, called the move a “severe blow” while Spanish Prime Minister Pedro Sanchez condemned the tariffs as “unintelligent” and Polish Prime Minister Donald Tusk referred to them as “unnecessary and stupid.”
On Friday, Trump renewed his stance during a meeting with the Italian Prime Minister, Giorgia Meloni, stating that he has “no hurry” to conclude trade deals as he believes the tariffs would bring significant revenue for the United States.