IMF warns that Trump’s plans could cost America heavily
The International Monetary Fund has warned that US economic policies under incoming President Donald Trump could influence the rest of the world and ultimately adversely affect the US.
The IMF says a dangerous wave of tariffs could worsen trade tensions, reduce investment, affect market pricing, distort trade flows and disrupt supply chains.
Although tariffs, tax cuts and deregulation may boost the US economy in the short term, they could also lead to a surge in inflation and subsequent recession.
It said this could weaken US Treasury bonds as safe bets.
The imminent arrival of Donald Trump to the White House dominates the section on risks in the IMF’s twice-yearly forecast for the world economy.
When he was last in power, Trump started a trade war with China and had to impose tit-for-tat tariffs with the EU because of US policy.
This time Trump has threatened to impose tariffs Countries including China, Mexico and CanadaAnd he said he would do it Impose 100% tariff on BRICS block If nine countries were to create a rival currency to the US dollar.
While the IMF estimates that these measures, along with tax cuts and deregulation, could boost the US economy in the short term, there are some unusually serious warnings about how this could impact the rest of the world and ultimately the US. .
It warns that an inflationary US boom could be followed by a potential recession that would potentially “undermine the role of US Treasuries as a global safe-haven asset”.
Investors view US Treasury securities as one of the safest possible bets, because the bonds – which are kind of like IOUs – are backed by the US government.
Furthermore, if red tape on trade is cut too much, it could lead to a sharp decline in the dollar, which could draw money from emerging economies, leading to a decline in global growth.
Trump moving forward with deportation of illegal immigrants could “permanently reduce potential output” and even increase inflation.
The IMF predicts global growth of 3.3% in both 2025 and 2026, below the historical average of 3.7%.
Its 2025 forecast was largely unchanged from the previous one, mainly because it expects greater US growth than previously predicted to offset lower growth in other major economies.
on thursday, The World Bank also warned that US tariffs could hit trade. And will slow global growth this year.
The bank forecasts global growth of 2.7% in 2025, which would be the weakest performance since 2019, on top of the sharp contraction seen at the peak of the Covid pandemic.
In the UK, the IMF predicts economic output will grow 1.6% in 2025, up from the 1.5% projected in October last year.
Chancellor Rachel Reeves said Britain was “projected to be the fastest-growing major European economy over the next two years and will be the only G7 economy, other than the US, to have its growth forecast upgraded for this year”.
