IMF warns of 'Trump tariff shock'..."Global GDP expected to decline 0.8% next year"

The International Monetary Fund, the IMF, has warned that the size of the global economy could shrink by 0.8% next year due to the tariff policies of former President Donald Trump, the U.S. Republican presidential candidate.

In a global economic outlook released on the 22nd local time, the IMF estimated that global gross domestic product (GDP) would fall 0.8% in 2025 and 1.3% in 2026, respectively, if high tariff policies affect much of global trade by the middle of next year, FT and Reuters reported.

The IMF analyzed 10% universal tariffs in the U.S. and 10% tariffs in both directions in the U.S., the Eurozone, and China, pointing out that retaliatory measures could affect a quarter of total trade in goods, and predicted that this would lower global economic growth next year than the 3.2% forecast.

This is based on the premise of Trump's 2017 tax cuts being extended by 10 years, net immigration to the United States and Europe is falling, and borrowing costs are growing globally.

Pierre-Olivier Gorinchas, chief economist at the IMF, pointed out that policies to raise trade barriers basically hurt everyone, including the United States.

Global economists worried that Trump's "20% universal tariff and 60% tariff on Chinese goods" policy could trigger a trade war.

Democratic presidential candidate Vice President Kamala Harris also supports higher tariffs on Chinese goods but opposes universal tariffs."The retaliatory measures will increase the risks associated with global economic growth," said economist

Gorinchas in an FT interview. "The results may not be the worst because this analysis assumes that the tariff measures will be taken only once."

"If tariff measures continue, the central bank will have to respond to low growth and inflationary pressures at the same time," he predicted, warning that further increases in government spending while already at its highest level would undermine the central bank's efforts to control inflation.

Gorinchas said additional financial support, such as tax cuts or increased spending, would cause the economy to go off the rails, "and countries need to rebuild their fiscal buffers, which is especially true of the United States."

Exceptionally, China should increase spending to stimulate the economy and address property issues comprehensively, he added.