IMF: Trade tensions could test stability of world economy
Newsflash: the head of the International Monetary Fund is warning that trade war tensions could rock the stability of the world economy, and the International Monetary System.
IMF managing director Kristalina Georgieva is releasing her latest global policy agenda now, which is aimed towards “anchoring stability and promoting balanced growth”.
In it, Georgieva cautions that the economic landscape is “rapidly changing”, due to the US trade war, saying:
Trade tensions have soared following the tariff announcements by the U.S. and responses to them, fueling a high level of uncertainty and market volatility, and threatening to stymie trade. These were in part driven by concerns about the uneven distribution of gains from economic integration, its impact on the international division of labor, supply chain security, and global imbalances.
These trade tensions could test the economic and financial stability of individual countries and the world economy, and the resilience of the International Monetary System (IMS).
The IMS is currently based around the idea that the US dollar is the global reserve currency, with the IMF sitting at the centre, and central banks around the world holding the system together.
Key events
Consumer goods maker Procter & Gamble has cut its sales and profit forecast today, blaming a pullback in consumer behavior as uncertainty over tariffs and the economy hits confidence.
P&G now expects flat sales for its current fiscal year after previously projecting growth of as much as four percent.
The company also warned that it could be forced to raise prices – passing on the impact of tariffs on imports to its customers.
CFO Andre Schulten told reporters on a call:
“We will have to pull every lever we have in our arsenal to mitigate the impact of tariffs within our cost structure and P&L [profit and loss statement].”
BoE’s Lombardelli: We can learn communication lessons about uncertainty from Covid crisis
The Bank of England can learn lessons from the Covid-19 crisis about how to communicate issues around uncertainty, according to one of its top policymakers today.
BoE deputy governor Claire Lombardelli argues that one of the biggest challenges facing the central bank – and the wider economics profession – is how to talk about economic uncertainty, and communicate with economic decision makers at businesses, households, and across the economy.
Speaking at an event organised by the Peterson Institute for International Economics in Washington today, Lombardelli says the Bank is learning a lot of lessons, both from the economics profession and the academic literature, but also from a number of other disciplines.
Lombardelli says:
So we learnt a lot, for example, during Covid about communication and communication of uncertainty from health professionals and scientists.
So I think there’s a real opportunity here for us to take those rigorous tools of economics and use them in a policy-making context that recognizes the uncertainty that we’re all trying to navigate through and helps economic agents navigate that uncertainty too.
It’s a muted start to trading on Wall Street today.
The Dow Jones industrial average has dropped by 0.4%, down 168 points to 39,437 points. It’s being dragged down by IBM, whose shares are down 8.5% after missing expectations with its latest financial results.
But the broader S&P 500 index is up 0.24% at 5,388 points, up 12 points.
Happily, trade war tensions have not led to a big increase in layoffs at US companies.
The number of new claims for unemployment support rose by 6,000 last week to 222,000, new data shows, still a relatively low level.
The just-released US initial jobless claims (for week ending April 19th) show absolutely no hint of an ‘imminent US recession’… pic.twitter.com/AvQSQhSJsc
— Counterpoint Dhaval Joshi (@DhavalVJoshi) April 24, 2025
IMF members in ‘anxious’ mood this week
Q: What has been the mood of IMF members at this week’s Spring meeting?
They are “anxious”, Kristalina Georgieva replies soberly, explaining:
The membership is anxious because we were just about to step on the road to more stability after multiple shocks.
Actually, she adds, the Fund had been worried that its forecast of 3.3% global growth this year was not high enough – before the Trump trade war forced it to cut that forecast eralier this week.
Georgieva adds that IMF members are also recognizing the importance of “a rule based global economy” in which both government and the private sector can plan with some certainty.
Turning to Argentina, Kristalina Georgieva says that the country has demonstrated that “this time it is different”, with a “decisiveness” to put the economy on a sound track.
She cites falls in inflation, and a drop in poverty levels from over 50% to around 27% now.
Georgieva says:
It [poverty] is still very high, but going down.
The state is stepping out from where it doesn’t belong, to allow more dynamism in the private sector.
That’s quite an endorsement of Javier Milei’s harsh austerity measures, in which public spending was slashed in a “chainsaw” campaign of fiscal balance and deregulation.
Asked about the outlook for Africa, Kristalina Georgieva says the continent has “so much to offer the world”.
She explains:
Obviously, they have the leaders, the natural resources, a young population.
I think a more unified, more collaborative continent can go a long, long way to be an economic powerhouse.
Georgieva: US recession risks have risen, but we’re not there yet
IMF chief Georgieva is then quizzed on why the Fund doesn’t believe the US will fall into a recession this year.
Grabbing a bottle of Perrier, she fills her glass more than half-way up – to illustrate that the Fund sees a less than 40% risk of recession in America this year.
She explains:
My glass, when you look at it, it is more than 60% full. Well, that’s this is where we are. This is what it is. How can I call it empty? I can’t.
When we look at the data, what we see is that for the United States, recession risks have increased now to 37%.
We don’t see either in the labor market or indicators for the functions of the economy such a dramatic loss of economic activity that will push growth in United States all the way to below zero.
Kristalina Georgieva also touches on yesterday’s stinging attack on the IMF by US Treasury secretary Scott Bessant.
She says the Fund “greatly value” the voice of the US, who are its largest shareholder.
During his speech yesterday, Bessent accused the IMF and World Bank of “mission creep”, and called on them to stop their “sprawling and unfocused agendas” on issues such as climate change and gender.
Georgieva seems keen to sooth the US, saying she very much appreciated that Bessent reiterated the US’s commitment to the fund and to its role, saying:
He raised a number of important issues and priorities for the institution that I look forward to discussing with us, authorities and the membership as a whole.
Central bank independence is “critical” for their credibility, Kristalina Georgieva adds.
She says central banks must strike a balance between supporting growth and containing inflation. To do so, they must not only adjust policy interest rates, but also rely on their credibility to anchor expectations, she points out.
