MUMBAI: The sweeping tariffs announced on Wednesday by US President Donald Trump pose a significant risk to the global economy at a time when growth has been sluggish, the head of the International Monetary Fund (IMF) said in a statement on Thursday.
India is among the worst-hit countries from Trump’s sweeping tariff move, with a 27% levy imposed on all shipments, as almost 18% of its total exports are to the US.
Slamming the punitive tariffs on as many as 180 countries, IMF managing director Kristalina Georgieva said in a statement issued from her headquarters in Washington DC on Thursday, “We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth. It is important to avoid steps that could further harm the world economy. We appeal to the US and its trading partners to work constructively to resolve trade tensions and reduce uncertainty.”
“We will share the results of our assessment in the world economic outlook, which will be published at the time of the IMF/World Bank spring meetings later this month,” she added.
Trump’s policy introduces a 10% tariff on all imports from countries outside the USMCA. For those not in compliance with the agreement, a 25% tariff remains. Nearly 60 nations with notable trade surpluses against the US are affected.
The IMF’s concerns are also tied to its global forecast. Back in January, the institution projected global growth to hit 3.3% this year—below the 3.7% average seen since the early 2000s. The IMF now plans to detail the broader implications of these tariffs in its upcoming world economic outlook report, which will be released during its spring meetings in Washington later this month.
She said Trump's wide-ranging tariffs have created great uncertainty and denting confidence, but it was not likely to trigger a near-term recession.
On Monday, Georgieva had said the IMF would likely lower the economic outlook slightly, adding "we don't see recession on the horizon."
Meanwhile, in a statement issued in Manila, the Asian Development Bank said the US’ new tariff regime risks slowing both US and global growth, shrinking export markets and potentially prompting a Federal Reserve response.
ADB’s chief economist Albert Park said unlike previous US-China trade tensions which saw manufacturing shift to Southeast Asia, this round of tariffs is broad enough to slow trade across the region and the fallout could dampen US growth and prompt the Federal Reserve to lower policy rates.
"The magnitude and breadth of the new US tariffs may slow growth in the US and globally so significantly that it will shrink total East Asian export opportunities rather than simply shifting production within it," Park said.
The US has imposed substantial levies on trading partners, including Southeast Asian nations, with Vietnam, Laos and Cambodia facing some of the highest rates. China, already facing economic headwinds, will have a 34% tariff, on top of the 20% Trump imposed earlier this year, bringing total levies to 54%.
The escalation in tariffs will have "negative repercussions for Chinese growth outlook," Park said, adding “China is likely to double down on their recent policy shift to prioritise domestic consumption while increasing trade with partners other than the US.”
Park has also warned that capital outflows from Southeast Asia are a "distinct possibility" as foreign investors typically retreat from riskier markets, and the tariffs have added a new layer of geopolitical and economic uncertainty.
However, the World Bank stopped short of directly commenting on the specifics of individual tariffs, but generally expressed concern about the potential negative impacts of trade protectionism, including tariffs, on global economic growth and development.
Trade wars and the resulting trade uncertainty can disrupt global supply chains, reduce investment, and hinder economic growth, particularly in developing countries, it said, and added that higher tariffs can negatively impact developing economies which often rely on trade for economic growth and development.
Meanwhile, the World Trade Organisation said world trade in goods could contract 1% because of the tariff wars.
“While the situation is rapidly evolving, our initial estimates suggest that these reciprocal tariffs, coupled with those introduced since the beginning of the year, can lead to an overall contraction of around 1% in global merchandise trade volumes this year, representing a downward revision of nearly 4 percentage points from previous projections,” WTO director general Ngozi Okonjo-Iweala said in a statement on Wednesday.
She further said that she is deeply concerned about this decline in world trade and the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade.
The WTO head further said it is important to remember that despite these new measures the vast majority of global trade still flows under the WTO’s most-favored-nation (MFN) terms.
“Our estimates now indicate that this share currently stands at 74%, down from around 80% at the beginning of the year. WTO members must stand together to safeguard these gains,” she said.
