IMF says tariff upheaval risks harm to ‘buoyant’ US economy

Published Thu, Feb 26, 2026 · 08:46 AM

[NEW YORK] Turmoil around sweeping US tariffs risks undercutting what’s otherwise a “buoyant” economy, the International Monetary Fund (IMF) said.

“Uncertainty around trade policies could represent a larger-than-expected drag on activity,” the Washington-based Fund said on Wednesday (Feb 25) in a summary of its latest annual review of the world’s biggest economy. The IMF said that it’s also possible that import taxes may not pass through to consumers as much as expected.

US President Donald Trump imposed the highest tariffs in roughly a century last year, saying they’d push companies to invest more in the US. Last week, many of those charges were struck down by the Supreme Court, pushing the administration to seek alternative authorities for taxing imports. A new 10 per cent across-the-board levy took effect on Tuesday, and Trump says he will raise the rate to 15 per cent.

Those changes came after the IMF had concluded what’s known as the Article IV consultation, an assessment of US economic and financial developments, managing director Kristalina Georgieva said in a press conference later Wednesday. Publication of the report was delayed due to last year’s government shutdown. Georgieva said she met with Treasury Secretary Scott Bessent and Federal Reserve chair Jerome Powell before today’s release.

The administration has invoked a crisis in the US balance of payments for its latest trade shift, an argument greeted with scepticism by many economists.

The US current-account deficit, seen as the broadest measure of trade, “is too big”, Georgieva said, though she added that it’s not an immediate or pressing concern. The IMF study also said the country’s declining net investment position “represents a potentially important source of vulnerability”.

The IMF also touched on US budget deficits that are large by historical standards, and called for measures to bring them down. “The upward path for the public debt-GDP ratio and increasing levels of short-term debt-GDP represent a growing stability risk to the US and global economy,” the study said.

Georgieva pointed to rapid productivity gains in the US labour force, citing it as a promising sign for the economy’s prospects. But the IMF also cited a tighter immigration policy that could strain the labour supply and hinder growth.

“Stricter border enforcement and increased removals are expected to reduce the size of the foreign-born labour force in the coming years resulting in slower employment growth, a modest increase in inflationary pressures, and a reduction in activity of around 0.4 per cent by 2027,” the report said. The Fund cut its forecast for medium-term potential expansion by a quarter percentage point, with “lower labour force growth expected to more-than-offset the gains in labour productivity”.

The IMF summary also highlighted the pressure on the Federal Reserve, which has been pushed by the Trump administration to slash interest rates. And the Fund warned against damaging budget cuts for the country’s data- and tax-collecting agencies.

“The US’s strong institutional framework for economic and regulatory policymaking should be maintained, including by respecting existing institutional protections and fully resourcing the agencies that are responsible for key federal functions,” it said. BLOOMBERG