By Karin Strohecker and David Lawder
WASHINGTON (Reuters) – Decisions by most countries not to retaliate against U.S. President Donald Trump’s tariffs are among the main factors bolstering the resilience of the global economy, IMF Managing Director Kristalina Georgieva said on Tuesday.
“The world has so far, and I can’t emphasize this enough, so far has chosen not to retaliate and continue to trade basically according to the rules that have existed,” Georgieva said during an event at the IMF and World Bank annual meetings in Washington, noting that this avoided a debilitating tariff escalation.
Earlier on Tuesday, the fund had raised its 2025 global GDP growth forecast in its World Economic Outlook to 3.2% from a 3.0% forecast in July, but warned that a renewed trade war between the United States and China, threatened by Trump, could significantly slow output.
Also supporting global growth is the fact that the US effective tariff rate has fallen from previous estimates, Georgieva said at the Bretton Woods Committee event. After calculating that the tariffs announced by Trump in April would average 23%, the rate was reduced by the United States’ trade agreements with the European Union, Japan and other major partners to about 17.5%, he said.
“However, the effective tariff, what is collected when exceptions are obtained to satisfy the need for the economy to function well, we estimate between 9% and 10%, so the burden is more than double what we thought it would be,” he added.
Other factors underpinning the global economy have been better policies by countries to boost private sector development and more efficient allocation of resources, as well as the agility of companies to avoid the worst effects of tariffs, anticipating imports and quickly reorganizing supply chains.
However, he said resilience could also be tested by overblown valuations in global markets, especially in the technology sector, which has fueled a stellar market rally this year.
“This is a gamble, a very big gamble,” he said. “If it works, great, then our problem with low growth will go away, because we will see an increase in productivity and we will see an increase in growth. What if it takes a while to come true or it doesn’t materialize at all? What then?”
IMF chief economist Pierre-Olivier Gourinchas told Reuters earlier that the AI ​​investment boom could lead to a crash similar to the dot-com crisis in 2000 that burned stock investors, but would likely not result in a systemic crisis because it has not been largely financed by debt.
(Reporting by David Lawder and Karin Strohecker, editing by Lincoln Feast)