Trump introduced tariffs with the final goal of decreasing the trade deficit. This means America will not have to take up more debt. However, the IMF says that the uncertainty over trade policies this year will increase the debt burden even more.
The remarks came after the IMF released predictions that the debt burdens of countries that make up 75% of the world’s GDP would grow in 2025 compared to the previous year. This included the US, China, Germany, France, Italy and the UK.
This means Trump is not only causing strife in America but also in other nations. According to the IMF’s top fiscal policy official, It’s possible that US President Donald Trump’s tax policies will cause the global government debt to rise to levels higher than expected.
There are currently $36.22 trillion in debts owed by the US. That’s made up of $28.96 trillion held by the public and $7.26 trillion owned by intergovernmental organizations. Trump’s plan is to make sure the country doesn’t add to this amount.
The IMF has also lowered its prediction for US economic growth this year more than any other advanced economy. In January, the IMF said that the US would grow by 2.7% this year. Now, they think that growth will be 1.8%.
The IMF points global government debt to 117%
Vítor Gaspar, the director of the IMF’s fiscal affairs department, said that the worst-case scenario right now is for public debt to rise from 92.3% of global output to 117% by 2027.
Gaspar told the Financial Times, “In 2025, uncertainty sharply rose, trade and geoeconomic uncertainties escalated, financing conditions tightened, financial market volatility increased, and spending pressures have intensified.”
He also said that the risks were “more considerable” than what the fund had thought they would be at the end of last year. In its most recent Fiscal Outlook, which came out on Wednesday, the IMF said that a global debt-to-GDP level of 117% would be the highest since the end of World War II.
It was 150% in 1946, which was the all-time high. In the 1950s and 1960s, it dropped sharply.
The global public debt went over $100tn for the first time in 2024. Gaspar warned that the world’s public debt was already “high, rising, and risky.” According to him, countries “should double down” on efforts to get their “fiscal house in order” this year because of “very high uncertainty” over trade policies.
The IMF applauds the German government
Vítor Gaspar praised the new German government’s plans to loosen the country’s debt brake. He called them a “very significant” step that would allow the country to spend more on infrastructure and other important projects.
He said, “This gives flexibility to a country with low debt levels, compared with the standard of advanced economies, to spend more.” However, the IMF expects 0% growth in Germany.
GDP forecast for 2025 from IMF:
India 🇮🇳: 6.2%
China 🇨🇳: 4.0%
USA 🇺🇸: 1.8%
Japan 🇯🇵: 0.6%
Germany: 0% (!)Euro area: 0.8%
Developing countries: 3.7%World Economic Outlook Growth Projections pic.twitter.com/C1uMLvh6st
— S.L. Kanthan (@Kanthan2030) April 23, 2025
He also said good things about the French government’s; “very promising” progress in passing their budgets.
Meanwhile, According to the IMF, there is 0.2% less growth in the euro area, where taxes are lower, so growth is now only 0.8%. Stronger fiscal spending will help economies in both China and the euro area this year and next. However, things are beginning to look up as Trump has said that tariffs on China will come down substantially. Trump is considering lowering taxes on China by 65%.
However, many developing market economies could experience big slowdowns if tariffs stay where they are. The IMF expects the growth of developing countries to slow down by 0.5% to 3.7%.
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