Six months ago the International Monetary Fund (IMF) warned that the world economy was heading for a serious slowdown, in the face of Donald Trump’s tariffs.
It slashed its forecasts for economic growth both in the US and predicted that global economic growth would slow to 2.8% this year.
Today the Fund has resurfaced with a markedly different message. It upgraded growth in both the US and elsewhere. Global economic growth this year will actually be 3.2%, it added. So, has the Fund conceded victory to Donald Trump? Is it no longer fretting about the economic impact of tariffs?
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Either way, the World Economic Outlook (WEO), the IMF’s six-monthly analysis of economic trends, is well worth a look. This document is perhaps the ultimate synthesis of what economists are feeling about the state of the world, so there’s plenty of insights in there, both about the US, about far-reaching trends like artificial intelligence, about smaller economies like the UK and plenty else besides. Here, then, are four things you need to know from today’s WEO.
The tariff impact is much smaller than expected… so far
The key bit there is the final two words. The Fund upgraded US and global growth, saying: “The global economy has shown resilience to the trade policy shocks”, but added: “The unexpected resilience in activity and muted inflation response reflect – in addition to the fact that the tariff shock has turned out to be smaller than originally announced – a range of factors that provide temporary relief, rather than underlying strength in economic fundamentals.”
In short, the Fund still thinks those things it was worried about six months ago – higher inflation, lower trade flows and weaker income growth – will still kick in. It just now thinks it might take longer than expected.
The UK faces the highest inflation in the industrialised world
