IMF Boosts US Growth Forecast: Improved Outlook Compared to Months Past, But Still Dimmer Than Last Year

According to the International Monetary Fund (IMF), the U.S. and global economies are set to grow a bit more this year than previously thought. Surprisingly, the tariffs from the Trump administration haven’t hit as hard as many expected. The IMF predicts the U.S. economy will grow by 2% in 2025, which is an improvement from earlier forecasts of 1.9% in July and 1.8% in April. Next year, they anticipate a growth of 2.1%, slightly better than previously projected.

However, these forecasts are still lower than last year’s estimates, indicating that tariffs may start to cast a shadow over the U.S. economy by introducing uncertainty for businesses. Back in October, the IMF had predicted a growth rate of 2.2% for this year.

Looking at the global stage, the IMF expects the economy to grow 3.2% this year, up from 3% in July. However, challenges remain, especially with ongoing tariff threats. For example, Trump recently suggested imposing a hefty 100% duty on all imports from China, which immediately sent shockwaves through the stock market.

IMF Chief Economist Pierre-Olivier Gourinchas highlighted that the uncertainty from tariffs hangs over many businesses. He noted, “The tariff shock is here, and it is further dimming already weak growth prospects.” Yet, there’s a silver lining: a boom in artificial intelligence (AI) investment is helping to prop up the economy. Gourinchas compared the current AI investment surge to the dot-com boom of the late ‘90s, warning that a market bubble could have serious repercussions if it bursts.

Interestingly, companies like AMD and Oracle have seen stock prices soar by 80% this year due to their involvement in AI. This boost in stock values has, in turn, increased wealth for many Americans, which has fueled consumer spending. Higher consumer spending might push central banks to raise interest rates in the future.

Gourinchas also outlined some factors explaining the resilience of both the U.S. and global economies despite tariffs. “The tariff shock itself is smaller than initially feared,” he noted, indicating that several countries have not retaliated with their own tariffs. Moreover, many U.S. firms took action to stock up on imports ahead of the tariff imposition, enabling them to delay price hikes.

However, much of this resilience might only provide temporary relief. The IMF’s report suggests that U.S. importers and retailers are absorbing most of the tariff costs, contrary to earlier predictions that foreign companies would bear the burden. Over time, these increased costs may end up being passed on to consumers.

Recent data shows that core inflation in the U.S. has ticked up to 2.9%, up from 2.7% last year. Hiring has also slowed significantly, likely as businesses adopt a more cautious attitude amid the tariff-related uncertainty.

In contrast, the National Association for Business Economics forecasts that the U.S. economy will grow only 1.8% this year and 1.7% in 2026. Nearly two-thirds of their surveyed economists believe that the tariffs are slowing growth by about half a percentage point.

Meanwhile, China has managed to shift its exports toward Europe and Asia, mitigating the impact of U.S. tariffs. The IMF anticipates that China’s economy will grow 4.8% this year, the same as its July forecast. However, Gourinchas cautioned that China’s economy relies heavily on exports and continues to struggle with a burdensome real estate sector.

In Europe, Germany is boosting growth by ramping up military spending. The IMF now expects the 20 eurozone countries to grow by 1.2% this year, an increase from an earlier forecast of 1%.

While the IMF works to promote economic stability and reduce poverty globally, the challenges posed by tariffs and global trade dynamics highlight the complexities of the current economic landscape. As experts continue to monitor these developments, it’s evident that both opportunities and risks lie ahead.

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International Monetary Fund, International trade, Economy, China, General news, Asia Pacific, Tariffs and global trade, Business, U.S. news, United States, Government policy, Pierre Olivier Gourinchas, Europe, Economic policy, U.S. News