The International Monetary Fund has slightly raised its global growth forecasts for 2025 and 2026. This cut stronger than expected purchases from 24.4% to 17.3% ahead of the US-imposed August 1 tariff jump and lower effective US tariff rates.
However, Tuesday’s forecast warned that the global economy faces significant risks, including a budget deficit that could draw out tariff rate rebounds, geopolitical tensions and interest rates and strengthen the global financial position.
“The global economy is still hurting, and even though it’s not as bad as it was, it will continue to hurt tariffs at that level,” said Pierre Olivier Goulinchas, the IMF’s chief economist.
With an update on the global economic outlook starting in April, the IMF has raised its global growth forecast for 2025 to 3% to 0.2%, and from 0.1% points in 2026 to 3.1%. However, this is below the forecast for January annual yearly 3.3%.
Global headline inflation was expected to fall to 4.2% in 2025 and 3.6% in 2026, but in the US, he noted that tariffs were passed on to consumers later in the year, making inflation likely outweigh the target in the US.
The US effective tariff rate – measured as a percentage of imports by import duties revenue – has been declining since April, but remains much higher than the estimated level of 2.5% in early January. According to the IMF, the corresponding tariff rate in other parts of the world is 3.5% compared to 4.1% in April.
US President Donald Trump has overturned world trade on Friday by imposing a universal tariff of 10% on almost every country since April, threatening even higher obligations. The much higher Tatt Tax Tax imposed by the US and China will be held until August 12th, with talks in Stockholm this week likely to lead to further extensions.
The US is also obliged to announce sudden duties ranging from 25% to 50% of automobiles, steel and other metals, and to be announced immediately in pharmaceuticals, wood and semiconductor chips.
Such future tariff increases are not reflected in the IMF numbers and could further increase effective tariff rates, create bottlenecks and amplify the effects of higher tariffs, the IMF said.
Changing tariffs
Gourinchas said the IMF was assessing the new 15% tariff deals the US reached with the European Union and Japan last week, which was too slow for July’s forecast, but the tariff rate is similar to the 17.3% rate underlying the IMF’s forecast.
“We don’t see any significant changes now compared to the effective tariff rates the US is leviing on other countries,” he said.
“We need to see if these transactions are fixed, if they are unraveled, if other changes to our trade policy continue,” he said.
According to the IMF, staff simulations showed that global growth in 2025 would be about 0.2 points lower when the maximum tariff rates announced in April and July are implemented.
The IMF said the global economy is proving resilient for now, but the uncertainty remains high, suggesting current economic activity “a distortion from trade rather than fundamental robustness.”
Gourinchas said the outlook for 2025 was helped by what he called “a tremendous amount” of frontloading as businesses were trying to move ahead of tariffs, but he warned that the increase in stockpiles would not continue.
“It’s going to go away,” he said, “it’s going to drag economic activity later this year by 2026. There’s a repayment of that front load, and that’s one of the risks we face.”
Tariffs were expected to remain high, he said, pointing to signs that U.S. consumer prices were beginning to rise.
“The underlying tariffs are much higher than they returned in January and February. If they remain, it will contribute to a truly inactive global performance compared to future growth.”
One extraordinary factor, Gourinchas said, was depreciation of the dollar, not seen amid the previous trade tensions.
US growth is expected to reach 1.9% in 2025, up 0.1 percentage points from the April outlook, and increased by up to 2% in 2026. The new US tax cuts and spending law was expected to increase the US budget deficit by 1.5 percentage points.
The Euro area forecast increased to 0.2% points in 2025 to 1%, while the 2026 forecast remained unchanged to 1.2%. The IMF said the upward revision reflects a historically significant surge in Ireland’s drug exports to the US. Without that, the revision would have been half the size.
China’s outlook has received a bigger upgrade of 0.8 percentage points, reflecting better-than-expected activity in the first half of the year, reflecting a significant drop in US-China tariffs after Washington and Beijing declared a temporary ceasefire.
The IMF increased its forecast for China’s growth for 2026 by 0.2 percentage points by 4.2%.
Overall, growth is expected to reach 4.1% in emerging markets and developing countries in 2025, lowering to 4% in 2026.
The IMF revised its global trading forecast to 2.6% up 0.9%, but reduced its 2026 forecast by 0.6% points to 1.9%.
