IMF Says Tariffs Could Drive Up Global Public Debt

The International Monetary Fund (IMF) said Wednesday (April 23) that the world’s governments should not let their support for those impacted by tariffs add to their already growing level of debt.

“Fiscal support for businesses and communities impacted by severe trade dislocations should be both temporary and targeted, with a strong emphasis on transparency and effective cost management,” the IMF said in a blog post.

The organization said this while warning that governments need to “put their fiscal house in order” at a time when public debt levels are rising in many countries.

The IMF expects global public debt to increase by 2.8 percentage points this year, which would push debt levels above 95% of gross domestic product, according to the post.

It also expects public debt to near 100% of GDP by the end of the decade.

In a “severely adverse scenario,” global public debt could reach 117% of GDP by 2027 — a level that would be the highest since World War II, per the post.

“Debt levels may rise even further than the debt-at-risk estimates if revenues and economic output decline more significantly than current forecasts due to increased tariffs and weakened growth prospects,” the post said. “Additionally, escalating geoeconomic uncertainties could heighten debt risks, driving up public debt through increased expenditures, particularly in defense. Demands for fiscal support could also rise for those vulnerable to severe disruptions from trade shocks, pushing up spending.”

This blog post came a day after the IMF reduced its forecast for economic growth in the United States in 2025 by 0.9 percentage point, attributing the downgrade primarily to the introduction of reciprocal tariffs announced by President Donald Trump on April 2.

The IMF now projects U.S. GDP growth at 1.8%, down from its January estimate of 2.7%, according to the World Economic Outlook it released Tuesday (April 22).

“The common denominator … is that tariffs are a negative supply shock for the economy imposing them, as resources are reallocated toward the production of noncompetitive goods, with a resulting loss of aggregate productivity, lower activity, and higher production costs and prices,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in the outlook.