Meanwhile, Higher US tariffs have so far had a smaller impact globally than expected, but it would be “premature and incorrect” to conclude they have had no effect on economic growth, the International Monetary Fund said Tuesday.
The IMF slightly upgraded its expectations for global and US growth for this year in its latest World Economic Outlook report, also citing a smaller-than-expected increase in the US tariffs themselves.
A flurry of trade announcements, including deals between the United States and several trading partners, have brought the average US tariff rate down from April highs to between 10% and 20% for most countries, according to the Washington, DC-based institution.
The IMF expects the world economy to grow 3.2% in 2025, up from its July forecast of 3% but “decisively below the pre-pandemic average of 3.7%.” The US economy, meanwhile, is seen growing 2% this year and 2.1% in 2026, marginally up from what the fund predicted in July.
“The United States negotiated trade deals with various countries and provided multiple exemptions,” IMF chief economist Pierre-Olivier Gourinchas wrote in a blog post, adding that most countries had also refrained from retaliating by raising tariffs on US goods. Businesses also adapted quickly by boosting imports ahead of tariff increases and “re-routing” their supply chains.
But he noted that trade tensions continue to flare up, there is no guarantee that trade agreements will last, and US importers might still pass on the cost of higher tariffs onto consumers.
“Past experience suggests that it may take a long time before the full picture emerges,” Gourinchas wrote.
US President Donald Trump launched a chaotic trade war with various countries this year, hiking tariffs, pausing some, changing others, and striking some trade agreements.
Underscoring the continued uncertainty over trade policies, trade tensions between the US and China escalated in recent days, with Trump threatening to impose a 100% tariff on China amid a dispute over its export controls on rare earths.
The impact of a tighter US immigration policy on the country’s labor market is also weighing on the outlook for the world’s largest economy, Gourinchas told reporters. The IMF’s forecast for US growth this year represents a sharp slowdown from an expansion of 2.8% in 2024.
“We have seen a very sharp reduction in the share of foreign-born workers in the labor force in the US… You can think of this as another negative supply shock on top of the tariff shock,” Gourinchas said.