IMF President States that Uncertainty Surrounding Trump’s Tariff Policy Has Reached New Heights, Foreseeing a Downward Revision of Global Economic Forecasts

Table of Contents

• Trade Uncertainty Reaches New Heights
• IMF Annual Meeting Focus Shifts to Tariff Issues
• IMF Lowers Global Economic Forecast
• Dollar’s Status Under Scrutiny

Trade Uncertainty Reaches New Heights

According to the Financial Times, International Monetary Fund (IMF) President Kristalina Georgieva stated on Thursday that the uncertainty surrounding global trade policies has reached “unprecedented levels,” and the large tariffs announced by former U.S. President Donald Trump will impact global economic growth, drive up prices, and potentially disrupt financial markets. Kristalina Georgieva pointed out that the United States, as the largest shareholder of the IMF, is leading a “global trade system reboot,” which will result in a “significant downward revision” of global growth expectations when the IMF updates its economic outlook next week. Although the IMF is expected to raise its inflation forecasts, it has not yet determined that Trump’s policies will lead to a global recession. She stated in her speech: “Volatility in financial markets is increasing, and the uncertainty surrounding trade policies has exceeded all measures.”

IMF Annual Meeting Focus Shifts to Tariff Issues

Kristalina Georgieva’s comments were made ahead of the upcoming spring meetings of the IMF and World Bank. The tariff policies proposed by Trump on April 2 may raise the average tariff levels in the U.S. to a century-high, and are expected to become the centerpiece of this meeting. Finance ministers from around the world are expected to meet with U.S. officials during the conference to negotiate tariff reductions. World Bank President Ajay Banga also urged governments to “prioritize negotiation and dialogue.”

IMF Lowers Global Economic Forecast

According to the IMF’s forecasts made in January of this year, global economic growth is projected to be 3.3% in both 2025 and 2026. This forecast was originally based on expectations of strong growth in the U.S. economy. However, following Trump’s unexpectedly aggressive trade policies, many analysts have downgraded their economic expectations for the U.S. The Peterson Institute for International Economics (PIIE) recently estimated that the GDP growth rate for the U.S. in 2025 could be as low as 0.1%, significantly down from 2.5% in 2024. Kristalina Georgieva stated that Trump’s tariff policies are a response to export subsidies provided to trading partners such as China and the European Union. She also pointed out that the Biden administration’s tax incentives for green energy manufacturing through the Inflation Reduction Act are also part of domestic subsidy policies. Trump is currently threatening to impose a 20% tariff on EU goods, while certain products from China may face tariffs as high as 245%.

Dollar’s Status Under Scrutiny

Kristalina Georgieva also warned that the uncertainty surrounding these trade policies could trigger more financial market stress events. She mentioned last week’s market sell-off, stock market declines, and rising U.S. Treasury yields as examples. She noted that during market panic, the dollar has depreciated, a phenomenon she described as “unusual,” and stated that “the ‘smile curve’ of the yield curve is not a pleasant smile, but a warning.” This decline of the dollar has also raised questions about its status as the global reserve currency. Brent Neiman, a former U.S. Treasury official and current professor at the University of Chicago, pointed out that although the dollar is deeply rooted in the global economy due to network effects, its status will be difficult to maintain if outsiders perceive the U.S. as no longer stable or law-abiding. “If the U.S. loses its commitment to stable policies and institutional order, it could indeed undermine the foundational status of the dollar.”