IMF ups global economic outlook after lower tariffs but warns of risk
The U.S.-based IMF's world outlook projects global growth to jump in 2026 to 3.1% from 3% this year in an "upward revision" from April's World Economic Outlook.
"This reflects front-loading ahead of tariffs, lower effective tariff rates, better financial conditions and fiscal expansion in some major jurisdictions," IMF officials wrote in the economic outlook update report.
IMF Chief Economist Pierre-Olivier Gourinchas said the United States had only "partly reversed course" in lowering its effective tariff rates to about 17% from 24%.
Economists pointed to currently higher U.S. inflation and "tentative" signs that consumers are covering the difference, while China's economy is forecast to see 4.8% growth.
"Despite these welcome developments, tariffs remain historically high," he added. "And global policy remains highly uncertain, with only a few countries having reached fully fleshed-out trade agreements."
British Chancellor of the Exchequer Rachel Reeves said the IMF's forecast showed that Britain remained "the fastest-growing European economy in the G7 despite the global economic challenges we are facing."
"However, I am determined to unlock Britain's full potential," Reeves told The Guardian, adding that the British government was "investing billions of pounds through our plan for change -- in jobs through better city region transport, record funding for affordable homes, as well as backing major projects like Sizewell C."
However, the IMF warned of other economic risks.
The IMF report said a rebound in effective tariff rates "could lead to weaker growth."
"Elevated uncertainty could start weighing more heavily on activity, also as deadlines for additional tariffs expire without progress on substantial, permanent agreements," it said.
But global growth "could be lifted if trade negotiations lead to a predictable framework and to a decline in tariffs."
IMF officials noted that U.S. President Donald Trump's GOP-led signature legislation passed earlier this month did bring some clarity to America's fiscal health, but it "added to uncertainty about longer-term fiscal sustainability" with IMF estimates projecting the new law will up the national deficit by 1.5% of next year's GDP.
On Sunday, Trump announced 15% tariffs on most of the 27-member European Union's exports down from the threatened 30%.
But according to the IMF's outlook report, restoring confidence, predictability and sustainability "remains a key policy priority."
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