"Throwing Sand into the Wheels of the Global Economy"

The International Monetary Fund (IMF) recently released an update to its World Economic Outlook report, warning that the global economy still faces significant risks due to potential U.S. tariff escalations, geopolitical tensions, and widening fiscal deficits, with trade tensions continuing to harm the world economy.

The IMF stressed that pragmatic cooperation among economies is crucial and called for efforts to reduce trade and investment barriers. Yet, to this day, the primary source of global economic uncertainty—the tariff war initiated by the U.S.—shows no signs of abating.

A new study by the Washington Center for Equitable Growth found that the Trump administration’s tariffs could hit U.S. manufacturing, raising factory costs by up to 4.5%. In the long run, tariffs may ultimately drag down U.S. economic efficiency.

In an exclusive interview, IMF Chief Economist Pierre-Olivier Gourinchas noted that the U.S. government has long justified tariff hikes as a way to reduce trade deficits while ignoring the root cause of those deficits: its domestic policies. "For the U.S., its domestic policies—particularly fiscal policy—are partly responsible for these deficits, which reached 6%-7% of GDP last year. With the passage of the 'Big and Beautiful' bill, this deficit level will persist. The main way to address external deficits isn’t through tariffs—it’s like throwing sand into the wheels of the global economy, making everyone worse off (without solving the underlying problem)."