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Uncertainty over global trade policies is “off the charts”, the head of the IMF has warned, saying Donald Trump’s tariffs were set to hit global growth, push up prices and potentially play havoc with financial markets.
Kristalina Georgieva said on Thursday that the ongoing “reboot of the global trading system” by the US, the fund’s biggest shareholder, would lead to “notable markdowns” in growth estimates.
But while the IMF will next week raise its forecasts for price pressures, it will stop short of predicting that the US president’s policies will push the global economy into an outright recession.
“Financial markets volatility is up,” said Georgieva in a speech. “And trade policy uncertainty is literally off the charts.”
Her comments came ahead of the IMF and World Bank’s spring meetings in Washington, where concerns over Trump’s threat to push US tariffs to their highest level in more than a century are set to dominate.
Finance ministers from around the world are expected to use next week’s gathering to try to meet their US counterparts and negotiate a reduction in the tariffs announced by Trump on April 2.
Ajay Banga, head of the World Bank, on Wednesday, called on governments “to care about negotiating and dialogue”.
“It’s going to be really important in this phase,” he said, referring to the White House decision to pause implementation of the “reciprocal” tariffs for 90 days. “The quicker we do it, the better that will be.”
The fund’s forecasting revisions will feature in the latest edition of its World Economic Outlook. In January, the IMF predicted a 3.3 per cent expansion in both 2025 and 2026, with the global economy boosted by the expectation of strong growth in the US.
After Trump surprised markets with a far more aggressive trade policy than expected, many analysts downgraded their forecasts, with some now seeing a significant risk of a recession in the world’s largest economy.
The Peterson Institute for International Economics said earlier this week that the US economy would grow by just 0.1 per cent — down from 2.5 per cent in 2024.
Georgieva said the Trump administration’s tariffs were a response to an “erosion of trust”, triggered in part by more economic subsidies for exporters in some of the US’s biggest trading partners, including China and the EU.
Washington has also provided manufacturing subsidies through measures such as former president Joe Biden’s Inflation Reduction Act, which gave tax breaks for producing green tech in the US.
Both Trump and Biden have highlighted Beijing’s massive state support of its manufacturing industries as a problem for America. Trump has threatened Brussels with 20 per cent tariffs, while China faces levies of 145 per cent.
Georgieva also warned that continuing uncertainty over trade policies risked creating more episodes of financial market stress, such as the sell-off last week when equity markets fell sharply and the US government’s borrowing costs rose.
The IMF managing director described the movements in markets, which also saw the US currency drop, as “unusual”.
“Despite elevated uncertainty, the dollar depreciated, and US Treasury yield curves ‘smiled’ — it is not the sort of smile one wants to see,” she said, adding that the movements “should be taken as a warning”.
The fall in the dollar amid the market panic has led some to question whether its status as the global reserve currency is under threat.
“Something that’s this well entrenched, that benefits from such strong network effects, there’s reason to be sceptical about a rapid unravelling [of the dollar’s status],” said Brent Neiman, a former US Treasury official under the Biden Administration who is now a professor at the University of Chicago.
“But major changes about the extent to which the US is considered a place of stable policies and reliable commitment to rules and the current order could certainly have an impact.”
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