The International Monetary Fund (IMF) recently downgraded its economic growth projections for Australia. For 2025, the IMF has increased its GDP growth projection to 1.8%, from 1.6% before. For 2026, the outlook was up — from 2.1% to 2.2%. This change comes against a backdrop of continued uncertainty around trade tariffs set by the Trump administration. These tariffs have developed into one of the largest forces impacting global economic maneuvering.
Donald Trump’s trade tariffs have acted as both a boon and a bane in creating these short-term forecasts. They had a huge role to play in turning around the fortunes of Australia. At the same time, they opened up new, unforeseen challenges for the future. Both U.S. consumers and firms rushed their purchases of affected products to beat the otherwise effective horror show that was the August 1 tariff deadline. They were particularly concerned about the possible hike of the current 10% to 15 or 20% — a big concern for most emerging economies.
Tariff Impacts on Global Trade
Now that picture has gotten much more complicated. Indeed, the EU, United Kingdom and Japan all made deals with Trump’s administration to prevent the imposition of higher duties. Meanwhile, the IMF noted that the U.S. administration imposed a baseline tariff on most economies, including Australia, just prior to its April forecast. This action, combined with other factors, laid the groundwork for a historic surge of imports into the U.S. Consequently, inflation increased, and the U.S. dollar depreciated.
In its periodic report, the IMF pointed the finger directly at Trump’s tariffs in explaining the recent global rebound in economic projections. In practice, the effective tariff rate in the U.S. today is 17.3%. This is a big decrease from the formerly expected FY 2024 rate of 24.4% that was announced in April.
“The US effective tariff rate underlying the projections is 17.3 per cent, compared with 24.4 per cent in the April reference forecast.” – IMF’s report
Risks and Future Outlook
While it did revise Australia’s prospects sharply upwards, the IMF is still guarded on global economic growth. It warned of a potential slowdown compared to previous years, emphasizing that “overall, risks to the outlook remain tilted to the downside.” This sentiment highlights the tenuousness of the current economy shaped by ongoing trade tensions.
India’s growth forecast for this year and next year stands at 6.4%, contrasting with Australia’s upgraded expectations. Those conflicting projections serve to illustrate the disparate effects of trade policies within and among countries.
