IMF more upbeat about US growth than just months ago, but outlook is
dimmer than last year
[October 15, 2025] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — The U.S. and global economies will grow a bit more
this year than previously forecast as the Trump administration's tariffs
have so far proved less disruptive than expected, the International
Monetary Fund said Tuesday, though the agency also said the extensive
duties still pose risks.
The United States' economy will expand 2% in 2025, the IMF projected in
its influential semiannual forecast, the World Economic Outlook. That is
slightly higher than the 1.9% forecast in the IMF's last update in July
and 1.8% in April. The U.S. should grow 2.1% next year, also just
one-tenth of a percent faster than its previous projection, the IMF
said.
Its current forecasts are still down from a year ago, however, a sign
that the international lending agency expects the tariffs to weaken the
U.S. economy, in part by creating more uncertainty for businesses. Last
October, the IMF forecast the U.S. would grow 2.2% this year.
All the projections also represent a slowing from 2024, when the U.S.
economy expanded at a faster 2.8%.
The global economy, meanwhile, will grow 3.2% this year, up from a 3%
estimate in July, the IMF forecast, and 3.1% in 2026, the same as its
previous estimate.
While the U.S. and world economies have fared better than expected, it's
too soon to say they are fully in the clear, the IMF said, as Trump has
continued to make tariff threats and it can take time for changes in
international trade patterns to play out.
On Friday, for example, Trump threatened to slap 100% duties on all
imports from China, which caused a sharp fall in the stock market.
IMF chief economist Pierre-Olivier Gourinchas said at a news conference
that the import taxes and ongoing threats to impose more duties have
created ongoing uncertainty for many businesses and are weighing on the
world economy.
“The tariff shock is here, and it is further dimming already weak growth
prospects,” he said.
Gourinchas also said that a burst of investment in artificial
intelligence, in the form of huge data centers and extensive computing
power, has helped offset the drag from trade and boosting the U.S.
economy. Yet if a financial market bubble formed and then burst, it
could sharply slow business investment and consumer spending, he said.
“There are echoes in the current tech investment surge of the dot-com
boom of the late 1990s," he said. “It was the internet then, it is AI
now.”
Shares of two companies active in the AI sector, AMD and Oracle, which
announced an expanding partnership Tuesday, have seen their shares rise
80% this year.
Gains in AI-related stock values have lifted Americans' wealth and
fueled consumer spending, Gourinchas said, just as companies are ramping
up their investments in advanced computer chips and building data
centers. Hotter spending and investment could push central banks to
raise interest rates over time, he said.
Gourinchas also offered several reasons the U.S. and global economies
have remained resilient after the widespread imposition of tariffs
earlier this year.
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International Monetary Fund (IMF) Managing Director Kristalina
Georgieva speaks at The Future of Finance conference during the
World Bank/IMF Annual Meetings at the International Monetary Fund
(IMF) headquarters in Washington, Tuesday, Oct. 14, 2025. (AP
Photo/Jose Luis Magana)
 “First and foremost, the tariff
shock itself is smaller than initially feared, with many trade deals
and exemptions,” he said. "Most countries also refrained from
retaliation, keeping the trading system open. And the private sector
also proved agile, front-loading imports and rerouting supply
chains.”
By front-loading imports, many U.S. companies were able to stock up
on goods before the duties took effect, enabling them to avoid or
delay price increases.
Yet many of those factors only reflect "temporary relief, rather
than underlying strength in economic fundamentals,” the IMF's report
said.
The IMF also said that import price data in the U.S. shows that so
far importers and retailers are paying most of the tariffs, not
overseas companies, as many Trump administration officials have
predicted. Over time, those firms are likely to pass on more of the
price hikes to consumers, the report said.
There are signs that some downsides of the higher tariffs are
starting to emerge, the IMF outlook said. Core inflation, which
excludes the volatile food and energy categories, has ticked up to
2.9%, according to the Federal Reserve's preferred measure, up from
2.7% a year ago. Hiring has ground to nearly a halt, which could
partly reflect a more cautious approach by many firms in the wake of
the uncertainty created by the higher tariffs.
The IMF's forecasts are modestly more optimistic than many
private-sector economists' expectations. The National Association
for Business Economics, a group of academic and business economists,
on Monday forecast that the U.S. would grow just 1.8% this year and
1.7% in 2026.
Nearly two-thirds of the economists surveyed by the NABE said they
think the administration's duties are nevertheless slowing growth,
by up to a half-percentage point.
China, meanwhile, has weathered the hit from U.S. tariffs by sending
more of its goods to Europe and Asia, rather than the United States,
the IMF said. Its currency has depreciated, which has made its
exports cheaper. The IMF is forecasting that China's economy will
expand 4.8% this year and 4.2% in 2026, the same as in July.
Gourinchas said that China's economy has grown increasingly
dependent on exports, while its real estate sector continues to
struggle under heavy debt loads.
“It is increasingly hard to see how this could be sustained,” he
added.
In Europe, Germany is bolstering growth by increasing government
spending to build up its military, Gourinchas said. The IMF now
expects the 20 countries that use the euro to grow 1.2% this year,
up from a 1% forecast in July, and 1.1% next year, the same as three
months ago.
The IMF is a 191-nation lending organization that works to promote
economic growth and financial stability and to reduce global
poverty.
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