The International Monetary Fund (IMF) issues a warning about the potential global disruptions resulting from the economic policies of incoming U.S. President Donald Trump. The IMF highlights that his proposed tariffs, tax cuts, and deregulation could heighten trade tensions, disrupt global supply chains, distort trade flows, and affect market stability.
While acknowledging that these measures might offer short-term economic benefits to the U.S., the IMF cautions that they could lead to an inflationary boom, potentially followed by an economic bust. This could weaken the role of U.S. Treasury bonds, which are widely seen as a safe investment globally.
In its biannual economic forecast, the IMF stresses the risks posed by Trump’s economic policies. The IMF notes that during his previous term, Trump initiated a trade war with China, leading to retaliatory tariffs from both China and the European Union. Currently, Trump threatens to impose tariffs on countries like China, Mexico, and Canada, as well as proposing 100% tariffs on BRICS nations if they introduce a currency rivaling the U.S. dollar.
The IMF suggests that, in the short term, these policies, along with tax cuts and deregulation, could stimulate U.S. economic growth. However, it warns that such measures might eventually cause inflationary pressure, which could diminish the appeal of U.S. Treasury securities as a global safe-haven asset.
The IMF also highlights concerns over excessive deregulation, which could lead to a stronger U.S. dollar, pulling capital away from emerging markets and potentially stalling global growth. Additionally, Trump’s proposed immigration policies, particularly his plans for deportations, could reduce the U.S.’s long-term economic output and increase inflationary pressures.
The IMF projects global economic growth of 3.3% for both 2025 and 2026, slightly below the historical average of 3.7%. The U.S. is expected to contribute positively to this growth, though slower expansion in other major economies may offset this boost. Despite concerns about Trump’s economic policies, the IMF predicts the U.S. will remain the fastest-growing economy in the G7, with growth rates of 2.7% in 2025 and 2.1% in 2026. However, these projections are based on the current policies of the Biden administration.
IMF Chief Economist Pierre-Olivier Gourinchas indicates that the world is emerging from recent global disruptions, including the COVID-19 pandemic and Russia’s invasion of Ukraine. However, the IMF warns that significant shifts in economic policy, as proposed by Trump, could destabilize both the U.S. and the global economy if they are implemented without careful consideration.
The IMF urges Trump and his economic advisors to avoid drastic policy changes that could threaten economic stability, both in the U.S. and globally.