IMF chief says lack of retaliation against Trump tariffs aiding global growth

WASHINGTON – Decisions by most countries to not retaliate against US President Donald Trump’s tariffs are among the top factors bolstering the global economy’s resilience, said International Monetary Fund (IMF) managing director Kristalina Georgieva on Oct 14.

“The world, so far, and I cannot stress enough, so far, has opted not to retaliate and to continue to trade pretty much on the rules that have existed,” Ms Georgieva said during an event at the IMF and World Bank annual meetings in Washington, noting that this avoided debilitating tariff escalation.

Earlier on Oct 14, the fund had edged up its 2025 global gross domestic product growth forecast in its World Economic Outlook to 3.2 per cent from a 3 per cent forecast in July. But it warned that a renewed US-China trade war threatened by Mr Trump could significantly slow output.

Also supporting global growth is that the effective US tariff rate has come down from prior estimates, Ms Georgieva said at the non-profit Bretton Woods Committee event.

After calculating that Mr Trump’s tariffs announced in April would average 23 per cent, the rate was reduced by US trade deals with the European Union, Japan and other major partners to about 17.5 per cent, she said.

“The effective tariff, though, what is being collected when you get exceptions to accommodate the need for the economy to function well, we calculate it somewhere between 9 per cent and 10 per cent, so the burden is more than twice less than we thought it would be,” she added.

Other factors propping up the global economy have been better policies by countries to boost private sector development and more efficient allocation of resources, as well as agility by companies to avoid the worst effects of the tariffs, by front-loading imports and quickly rearranging supply chains.

However, she said the resilience could also be tested by the stretched valuations in global markets – especially the tech sector, which has fuelled a stellar market rally in 2025.

“This is a bet, very big bet,” she said. “If it pays back, fantastic, then our problem with low growth is gone, because we will see an increase in productivity, and we will see an increase in growth. What if it is either slow to come true or doesn’t quite materialise. What then?“

IMF chief economist Pierre-Olivier Gourinchas told Reuters earlier that the artificial intelligence investment boom could lead to a bust similar to the dot.com crash in 2000 that burned equity investors, but it is unlikely to result in a systemic crisis because it has not been heavily funded by debt. REUTERS