IMF says tariff uncertainty risks hampering ‘buoyant’ US economy

WASHINGTON – Turmoil around

sweeping US tariffs

risks undercutting what is otherwise a “buoyant” economy, the International Monetary Fund (IMF) said.

“Uncertainty around trade policies could represent a larger-than-expected drag on activity,” the IMF said on Feb 25 in a summary of its latest annual review of the world’s biggest economy. The fund said it is also possible that import taxes may not pass through to consumers as much as expected.

US President Donald Trump imposed the highest tariffs in roughly a century in 2025, saying they would push companies to invest more in the United States.

Last week, many of those charges were

struck down by the US Supreme Court,

pushing the administration to seek alternative authorities for taxing imports. A new 10 per cent across-the-board levy took effect on Feb 24, and Mr Trump says he will raise the rate to 15 per cent.

Those changes came after the IMF had concluded what is known as the Article IV consultation, an assessment of US economic and financial developments, managing director Kristalina Georgieva said at a press conference on Feb 25.

Publication of the report was delayed due to a US government shutdown. Ms Georgieva said she met US Treasury Secretary Scott Bessent and Federal Reserve chairman Jerome Powell before the Feb 25 release.

The administration has

invoked a crisis in the US balance of payments

for its latest trade shift, an argument greeted with scepticism by many economists.

The US current-account deficit – seen as the broadest measure of trade – “is too big”, Ms Georgieva said, though she added that it is not an immediate or pressing concern.

The IMF study also said the country’s declining net investment position “represents a potentially important source of vulnerability”.

The IMF also touched on US budget deficits that are large by historical standards, and called for measures to bring them down.

“The upward path for the public debt-GDP ratio and increasing levels of short-term debt-GDP represent a growing stability risk to the US and global economy,” the study said.

Ms Georgieva pointed to rapid productivity gains in the US labour force, citing it as a promising sign for the economy’s prospects. But the IMF also cited tighter immigration policy that could strain labour supply and hinder growth.

“Stricter border enforcement and increased removals are expected to reduce the size of the foreign-born labour force in the coming years, resulting in slower employment growth, a modest increase in inflationary pressures, and a reduction in activity of around 0.4 per cent by 2027,” the report said.

The IMF cut its forecast for US medium-term potential expansion by a quarter percentage point, with “lower labour force growth expected to more than offset the gains in labour productivity”.

The IMF summary also highlighted the pressure on the Fed, which has been pushed by the Trump administration to slash interest rates. The Fund warned against damaging budget cuts for the country’s data- and tax-collecting agencies.

“The US’ strong institutional framework for economic and regulatory policymaking should be maintained, including by respecting existing institutional protections and fully resourcing the agencies that are responsible for key federal functions,” it said. BLOOMBERG