IMF Chief: Trump's Threat To Increase Tariffs Could Further Disturb The Global Economy

Bloomberg/Jim Vondruska

IMF Chief: Trump's Threat To Increase Tariffs Could Further Disturb The Global Economy

Tuesday, 14 Jan 2025

The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has indicated that the tariff threats posed by U.S. President-elect Donald Trump could lead to an increase in long-term interest rates globally. Citing Bloomberg on Sunday, January 12, 2025, Georgieva noted that uncertainty surrounding the forthcoming administration's trade policies adds to the economic challenges faced worldwide. She remarked that this trend is already evident through rising long-term interest rates, stating, "This occurs even as short-term rates have declined, a highly unusual combination."

Trump, who is set to take office on January 20, 2024, has pledged to impose new tariffs on imports from U.S. adversaries such as China, as well as allies including Canada and Mexico. This has heightened concerns that supply chain disruptions could hinder economic growth and drive prices upward.

IMF Chief Economist Pierre-Olivier Gourinchas warned in October that tariffs and trade uncertainties could reduce global output by approximately 0.5%. The final weeks of 2024 and the early days of the new year have witnessed a sharp rise in bond yields across many countries and a surge in the U.S. dollar as investors assess the potential impacts of Trump's second-term policies. Georgieva stated, "It is not surprising that there is significant global interest in the direction of the forthcoming administration's policies, particularly regarding tariffs, taxes, deregulation, and government efficiency," given the size and importance of the U.S. economy.

She further explained that the effects of U.S. trade policies will be most pronounced in countries and regions integrated into global supply chains, particularly among many middle-income nations and across Asia as a whole. Georgieva added that the strength of the U.S. dollar could lead to higher interest rates for emerging market economies, especially in low-income countries.