US President-elect Donald Trump’s tariff threats are driving up global long-term borrowing costs, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva. She warned that uncertainty surrounding Trump’s trade policies, which include potential tariffs on imports from nations like China and allies such as Canada and Mexico, is contributing to global economic headwinds. This uncertainty is pushing long-term interest rates higher, even as short-term rates decrease, an unusual situation, Georgieva noted. Trump’s tariff threats have a significant impact on the global economy.
Georgieva stated that the impact of US trade policies will be most significant on countries integrated into global supply chains, particularly in medium-sized economies and regions like Asia. She also emphasized that the strength of the US dollar could lead to increased funding costs for emerging-market and low-income economies.
While the IMF predicted a global economic expansion of 3.2% for 2025, an updated forecast is expected on January 17. Georgieva hinted that the global growth outlook would likely remain stable, but with significant variations: the US economy is performing better than expected, the European Union is facing stagnation, and China is grappling with deflationary pressures and low domestic demand. Trump’s tariff threats could further complicate these economic conditions.
The IMF has been concerned about weak global growth since the pandemic, and Georgieva stressed the importance of monitoring Trump’s policies on tariffs, taxes, deregulation, and government efficiency, as they will shape global economic trends. Trump’s tariff threats have made it imperative to closely watch these policy changes.
The uncertainty surrounding Trump’s trade policies has created ripples across the financial markets, with economists cautioning that prolonged ambiguity could deter investment and slow recovery efforts globally. Emerging markets, which rely heavily on foreign capital and export-led growth, may face additional challenges in stabilizing their economies under these conditions.
Georgieva highlighted the role of global cooperation in addressing these risks, urging nations to prioritize collaboration over protectionism. She expressed concerns about the potential for a trade war, emphasizing that such an outcome would only exacerbate existing economic vulnerabilities.
Additionally, experts have pointed out that the ripple effects of increased tariffs and economic uncertainty may extend to consumer prices, further impacting purchasing power and demand in key markets. Policymakers have been advised to prepare for potential disruptions in global supply chains that could further stress fragile economies.
The IMF’s call for vigilance reflects growing unease about the impact of US policies on a world still grappling with post-pandemic recovery. Georgieva concluded by stating that global economic stability depends on balanced, predictable, and cooperative trade practices.
