IMF Chief: Trump Tariffs Threats Push Global Rates Higher

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said that threats by U.S. President-elect Donald Trump to impose tariffs are already pushing up long-term borrowing costs around the world.

Georgieva told reporters in Washington on Friday that uncertainty over the incoming administration’s trade policies is adding to the headwinds for the global economy, and that “it’s already being expressed globally in higher long-term interest rates.” She explained that this is happening even as short-term interest rates are falling, which she called “very unusual.”

Trump, who is set to take office on Jan. 20, has pledged to impose new tariffs on imports from U.S. rivals such as China, as well as allies including Canada and Mexico, raising concerns that disruptions to supply chains could slow economic growth and push up prices. 

The IMF’s chief economist, Pierre-Olivier Gourinchas, warned in October that tariffs and trade uncertainty could reduce global output by about 0.5%.

The final weeks of 2024 and the first days of the new year have seen sharp increases in bond yields across much of the world, as well as a rise in the value of the US dollar, as investors assess the potential impact of Trump’s second-term policies.

The bursting of the AI ​​bubble and the loss of patience of bond investors with profligate governments are among the concerns in 2025, but the biggest concern is Donald Trump’s tariffs.

“It is not surprising, given the size and role of the US economy, that there is a great deal of global interest in the direction of the next administration’s policies, particularly on tariffs, taxes, deregulation and government efficiency,” Georgieva said. 

She added that the impact of US trade policies will be most severe on countries and regions that are integrated into global supply chains, including many medium-sized economies and the wider Asia region.

Georgieva noted that a strong dollar “could lead to higher financing costs for emerging market economies, especially low-income countries.”

 She said U.S. economic figures, including Friday's strong jobs report, showed the Federal Reserve "could wait for more data before making further cuts" to its benchmark interest rate.