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Key Takeaways
- The U.S. economy is expected to grow 2% in 2025, slightly better than previously expected, according to an International Monetary Fund report, which found that tariffs haven’t been as damaging as economists feared.
- Growth projections for both the U.S. and the global economy are still lower than they were in January, before President Donald Trump unveiled sweeping tariffs.
- Tariff risks remain, while a potential AI spending bubble could also upend economic growth, the report found.
Tariffs aren’t hurting the U.S. economy as much as expected, according to a new report from the International Monetary Fund. But they are still weighing on U.S. economic growth.
U.S. trade deals helped blunt the impact of the tariffs, while quick action from corporations to front-load buying and reroute supply chains also helped, the IMF’s latest revisions to its World Economic Outlook showed.
Why This Matters to You
President Donald Trump’s aggressive tariff policies sent shockwaves through the global economy when they were first announced, and economists warned of grave repercussions. While severe effects have yet to materialize, both businesses and consumers should be aware that the U.S. and the rest of the world still face serious economic risks.
“The good news is that the growth downgrade is at the modest end of the range. The reasons are clear. The United States negotiated trade deals with various countries and provided multiple exemptions,” wrote IMF Research Director Pierre-Olivier Gourinchas.
The IMF projected that U.S. gross domestic product (GDP) would grow 2% in 2025 and another 2.1% in 2026. That’s an improvement from the 1.8% U.S. growth projection the IMF made in April when tariff threats were escalating between the U.S. and its trading partners. But that growth is still below January’s estimate of 2.7% growth. Global economic growth is also projected to slow slightly in 2025 and 2026, the Fund said.
The IMF report also projected U.S. inflation to decline over the next two years, while U.S. unemployment was projected to moderately increase. The report comes as U.S. inflation has not increased substantially despite President Donald Trump’s tariff policies, while U.S. GDP grew at 3.8% in the second quarter.
Trade Tensions, AI Bubble Present Risks
But while tariffs may not be turning out to be as bad as feared, Gourinchas wrote that trade tensions could still have an impact on the global economy, especially if firms begin to pass on more tariff costs to their customers.
“Past experience suggests that it may take a long time before the full picture emerges,” he wrote.
Trade tensions aren’t the only thing that could impact the U.S. economy, as stricter immigration policies could slow the labor market. However, the report noted that lower interest rates, increased stimulus from the “One Big, Beautiful Bill,” and the artificial intelligence (AI) spending boom stood to boost the U.S. economy.
But that AI spending could be disappointing if it doesn’t deliver profits, potentially bursting what might be an AI bubble, the report noted. Rising government debt also posed a problem.
“Despite a steady first half, the outlook remains insufficiently bright, with risks tilted to the downside,” Gourinchas wrote.
