The International Monetary Fund (IMF) reviewed its “world economic outlook” upwards, revising the expected growth in 2025 to 3%, up from the 2.8% projection in April. Growth in 2026 was also revised to 3.1%, more optimistic than the previously predicted growth of 3%.
IMF Chief Economist, Pierre-Olivier Gourinchas, downplayed the impact of Trump’s tariffs on international trade. He said the damage was almost negligible in polite language, calling it the world economy’s “tenuous resilience.” He pointed out that most levies were unlikely to cause the economic chaos previously forecasted.
The U.S. economy is expected to grow by 1.9%, up from the April estimation of 1.8%. Next year’s estimates also increased from 1.7% to 2%. China is also expected to grow by 4.8%, 0.8 percentage points higher than anticipated in April. Gourinchas believes that the decline of the U.S. dollar and the RMB has played a significant role in this revised outlook. He added that diversified, strong export sales to Asia and other regions would improve the world’s economic outlook.
Gourinchas asks Trump’s administration to steer clear of the Fed
The IMF Chief Economist subtly asked Trump’s administration not to interfere with the Fed’s independence, claiming it could cause financial, macroeconomic, and monetary volatility. However, he pointed out that reducing tariffs from 24% to 17% on U.S. imports could ease tariff-related pressure.
Gourinchas also said companies that had stocked and hoarded imports ahead of the implementation of tariffs played a critical role in boosting this year’s projected economic growth. However, Trump insists that cutting the Fed rates to 1% can improve the country’s economic growth. The angered U.S. president recently called the Fed Chair, Jerome Powell, a “numbskull.” Trump argued that the current high lending rates (4.25%-4.5%) increased the government’s refinancing cost by “hundreds of billions of dollars.”
“Without comprehensive agreements, the ongoing trade uncertainty could increasingly weigh on investment and activity.”
–Pierre-Olivier Gourinchas, Chief Economist at the IMF
Gourinchas also warned that an intensified attack on the Federal Reserve could “worsen the situation.” He pointed out the importance of upholding the Fed’s independence, adding that central banks were essential for economic stability and anchoring inflation. The economist further highlighted the “soft landing” by the world’s central banks as one of the key reasons these institutions needed to remain credible. The pursuit of price stability required a great deal of independence.
IMF breaks down global growth projections
The IMF estimated that developing and emerging economies would grow by 4.1% in 2025, an increase of 0.4 percentage points from April’s estimates. Advanced economies were expected to grow by 1.5%, up from the 1.4% estimation in April. Growth forecasts for Mexico, the U.S., Britain, China, Canada, Brazil, Nigeria, Japan, Saudi Arabia, and the Euro Area were upgraded.
Gourinchas said this resilience was welcome, as the impact of trade shocks was less severe than previously feared. However, he mentioned that risks posed by the slow development of trade talks around Trump’s tariffs still caused uncertainty. The IMF also asserted that economic policy uncertainty remained high for 2025 and 2026.
The IMF economist urged countries to reduce policy-related uncertainty and promote more transparent and clear international trade frameworks. He emphasized that “pragmatic cooperation” was “paramount,” especially since international trade rules were dysfunctional. Overall, Gourinchas believes that geopolitical tensions and fiscal vulnerabilities could also be “precarious” to the “equilibrium” of stances in trade policy.
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