“The world, so far, and I cannot stress enough, so far, has opted not to retaliate and to continue to trade pretty much on the rules that have existed,“ Georgieva said during an event at the IMF and World Bank annual meetings in Washington, noting that this avoided debilitating tariff escalation.
Also supporting global growth is that the effective U.S. tariff rate has come down from prior estimates, Georgieva told the Bretton Woods Committee event. After calculating that Trump’s tariffs announced in April would average 23%, the rate was reduced by U.S. trade deals with the European Union, Japan and other major partners to about 17.5%, she said.
Other factors propping up the global economy have been better policies by countries to boost private sector development and more efficient allocation of resources, as well as agility by companies to avoid the worst effects of the tariffs, by front-loading imports and quickly rearranging supply chains.
“This is a bet, very big bet,“ she said. “If it pays back, fantastic, then our problem with low growth is gone, because we will see increase in productivity and we will see an increase in growth. What if it is either slow to come true or doesn’t quite materialize. What then?”
IMF chief economist Pierre-Olivier Gourinchas told Reuters earlier that the AI investment boom could lead to a bust similar to the dotcom crash in 2000 that burns equity investors, but that it would not likely result in a systemic crisis because it has not been heavily funded by debt. - Reuters
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