The International Monetary Fund nudged its global growth outlook to 3.2% for 2025 and 3.1% for 2026, then delivered a blunt caveat: do not mistake early resilience for harmless tariffs.
In its October World Economic Outlook, the Fund said some of the near-term shock was softened by front-loaded imports, one-off deals, and supply chains that pivoted quickly, but warned those cushions are fading.
Pierre-Olivier Gourinchas, the IMF’s chief economist, put it more starkly in an IMF blog post, writing: “Should we conclude that the shock triggered by the tariff surge had no effect on global growth? That would be both premature and incorrect.”
He added that import prices excluding tariffs have barely moved so far, which places the burden mainly on U.S. importers, but firms may still pass on costs and lock in trade rerouting that reduces efficiency.
The Fund flagged three reasons the verdict is not in: First, the U.S. effective tariff rate remains about 19 percent, keeping a significant policy shock in place even after exemptions and bilateral resets.
More Read
Second, continued trade tensions keep uncertainty elevated, which can sap investment and productivity over time.
Third, as supply lines reconfigure, permanent detours in global commerce can ratchet up costs for businesses and consumers.
Those pressures come alongside other forces that have masked the initial blow. Looser financial conditions, a softer dollar earlier this year, and an investment boom tied to artificial intelligence helped offset weaker trade.
Even so, compared with a year ago the IMF now sees slightly weaker U.S. growth and higher inflation, a classic profile of a negative supply shock. The agency also quantified the risk if tensions escalate from here.
Renewed tariff hikes combined with fresh supply chain snarls could shave roughly 0.3 percentage point from global output next year, a meaningful hit for a world already running below its pre-pandemic speed.
Margins that held up thanks to stockpiled inputs and quick diversions may feel more strain as exemptions expire and logistics detours harden.
This is particularly salient for sectors with extensive cross-border footprints, including the automotive, machinery, and consumer goods industries.
Canada’s policy debate over electric vehicles shows how the country balances trade, jobs, and tariffs as it weighs competitiveness against supply-chain resilience.
In British Columbia, a targeted tariff relief program underlined the need for cushioning measures when import costs bite.
More Read
The Nasdaq hits new all-time high earlier this year highlighted how optimism around AI and easier financial conditions can overwhelm trade headlines. The IMF’s warning is that this cushion is not guaranteed.
If AI investment disappoints or valuations reset, growth and risk appetite could wobble together.
Funding markets are another watchpoint after repo market strains in Canada flashed in September as quantitative tightening neared a turning point.
Tariffs are a tax on cross-border flows, and the IMF’s new baseline says that tax is still in the system.
The longer trade gets rerouted, the greater the chance of embedded price pressures, stickier inflation in import-heavy categories, and slower productivity as firms settle for sub-optimal suppliers.
That mix can complicate central banks’ path to lower rates and make earnings more sensitive to cost control rather than topline growth.
Clearer and more durable trade agreements that reduce policy uncertainty could lift output in the near term, and rolling back new barriers would add more. But the bigger point is about time.
The accounting for this tariff cycle will not be instantaneous, which is why the IMF is urging officials and investors to resist drawing comfort from early data.
