The International Monetary Fund (IMF) has raised its 2025 global growth forecast, saying the global economy has been more resilient to higher U.S. tariffs than expected, but warned that persistent trade uncertainty “could weigh on the outlook.”
The 2025 World Economic Outlook report, released on Oct. 14, noted the new trade deals between the United States and several major economies.
Washington this year struck trade deals with the EU, the UK, South Korea, and Pakistan. The IMF said the deals and the overall restraint from the rest of the world largely “kept the trading system open.”
The IMF now projects global growth at 3.2 percent in 2025, up from 3.0 percent in July and 2.8 percent in April, when it initially revised its outlook downward. Growth is expected to slow slightly to 3.1 percent in 2026, unchanged from the July projection.
“The good news is that the negative impact on the global economy is at the modest end of the range,” the report said.
It noted that companies front-loaded imports in the first half of the year and rapidly reorganized supply chains to redirect trade flows.
At a press conference in Washington, IMF chief economist Pierre-Olivier Gourinchas said that global output has been supported by an agile private sector, fiscal stimulus in Europe and China, and a surge in investment driven by artificial intelligence (AI).
Gourinchas, however, warned that “trade uncertainty is still with us.”
His remarks were made after Beijing imposed new export curbs on rare earths, blacklisted U.S. defense firms, and launched a probe into Qualcomm, prompting President Donald Trump to threaten 100 percent tariffs and new export controls starting Nov. 1.
Gourinchas said that if restrictions on critical exports were introduced, “there could easily be a decline in global output by about 0.3 percentage points.”
The IMF noted that “substantial cuts to international development aid and new restrictions on immigration have been rolled out in some advanced economies.” At the same time, more expansionary fiscal stances in major economies have boosted short-term activity but raised concerns about debt sustainability and potential spillovers.
“The world’s economies, institutions, and markets are adjusting to a landscape marked by greater protectionism and fragmentation,” the report said, saying that medium-term growth prospects remain dim and that global policies need recalibration to address rising uncertainty.
Cooling Inflation, Uneven Growth
Global inflation is projected to ease to 4.2 percent in 2025 and 3.7 percent in 2026, though price pressures in the United States remain persistent, according to the report. Advanced economies are set to grow around 1.5 percent in 2025–26, with U.S. expansion slowing to 2 percent, while emerging and developing economies are expected to hold just above 4 percent.
The fund said that “larger-than-expected shocks to labor supply,” especially from lower immigration, could cut growth in advanced economies with aging populations.
In the United States, Gourinchas told reporters, there are “other forces pushing the other direction.”
“We mentioned the AI investment surge. There is a fiscal policy that is becoming quite stimulative. Consumption has been fairly robust. Overall growth in the U.S. has remained fairly, fairly good. Slow down from 2024 but it’s still about 2 percent in our estimate for 2025.”
The report noted that the “current AI boom presents some parallels with the dot-com boom of the late 1990s.”
Market optimism about a new technology—the internet then, and AI now—is driving up stock valuations, the IMF said, fueling a tech-focused investment surge, and supporting consumer spending through strong capital gains.
The fund noted that this could could lead to a higher neutral interest rate and if the AI boom continues without slowing, rising demand pressures may require tighter economic policies.
On China, the IMF said the country’s growth model faced “strains” as domestic demand remained weak and the property sector continued to drag on confidence.
“Domestic demand has been very weak for some time now,” Gourinchas said, adding that China needs to rebalance its growth model toward sustainable domestic demand.
The IMF urged governments to rebuild fiscal buffers, maintain central bank independence, and pursue clear, rules-based trade policies to reduce uncertainty and support investment.
It said medium-term fiscal plans should combine “spending rationalization and revenue generation,” with any new stimulus “temporary and well-targeted.”
