Trade barriers are costly, but global recession unlikely: IMF chief

The head of the International Monetary Fund (IMF) said Thursday that the world economy is likely to avoid a recession despite mounting global trade tensions sparked by US President Donald Trump’s sweeping tariffs. However, the cost of these trade disruptions will be significant, IMF Managing Director Kristalina Georgieva warned.
Speaking to reporters in Washington ahead of next week’s Spring Meetings of the IMF and World Bank, Georgieva said the Fund expects "notable" markdowns to global growth, though not a contraction.
“Trade disruptions incur costs,” Georgieva said, referencing recent market volatility driven by Trump’s stop-start tariff rollout, which has triggered the sharpest swings since the COVID-19 pandemic, as reported AFP.
“This is a reminder that we live in a world of sudden and sweeping shifts,” she said in prepared remarks. “And it is a call to respond wisely.”
Georgieva’s comments suggest the IMF will revise down its earlier global growth forecast of 3.3 percent for both 2025 and 2026 in its upcoming World Economic Outlook, due next Tuesday.
‘Uncertainty is costly’Georgieva outlined three major risks from rising trade barriers, particularly for smaller advanced economies and emerging markets that are heavily reliant on global trade.
“First, uncertainty is costly,” she said. “It becomes difficult for business to make plans if they do not know how much their inputs will cost in the future.”
“Second, rising trade barriers hit growth upfront,” she said. “Tariffs, like all taxes, raise revenue at the expense of reducing and shifting activity.”
Her third point warned that “protectionism erodes productivity over the long run, especially in smaller economies.”
Georgieva called on countries to take corrective steps at home by adjusting fiscal policy to lower debt and ensuring central bank independence is preserved through “agile and credible” monetary policy.
'A more level playing field'Georgieva also outlined country-specific challenges, calling on China to boost domestic consumption and shift away from a state-driven, export-heavy growth model. For the United States, she urged authorities to put surging public debt “on a declining path.”
As for the European Union, the IMF chief emphasized the need to enhance competitiveness by “deepening the single market.”
“In trade policy, the goal must be to secure a settlement among the largest players that preserves openness and delivers a more level playing field,” she said.
Her remarks underscore the IMF’s longstanding position in favor of free trade and open markets, even as global economies grapple with rising protectionism.
“We need a more resilient world economy, not a drift to division,” Georgieva added. “And, to facilitate the transition, policies must allow private agents time to adjust and deliver.”