The US economy is in good shape and outpacing its peers, the IMF said Friday, but it faces some threats from the policies of Donald Trump.
|
Listen To This Story
 |
Incoming President Donald Trump may pretend that the US economy is in tatters, but the numbers tell a very different story, according to the International Monetary Fund (IMF).
An update to its world economic outlook published on Friday shows that the US outpaced peer economies, like that of the EU, Japan, Canada, and Great Britain in 2024 and is expected to continue doing so this year.
“In the United States, underlying demand remains robust, reflecting strong wealth effects, a less restrictive monetary policy stance, and supportive financial conditions,” the IMF stated in projecting the US economy to grow by 2.7 percent, which is far ahead of the 1.0 percent predicted in the EU.
That figure is substantially higher than in the IMF’s October forecast, which had put US growth for this year at 2.2 percent. According to the report, that change reflects the robust labor market that Trump inherits from President Joe Biden, as well as accelerating investment.
Overall, the US economy is trending up while its competitors are stagnating or heading in the other direction.
Globally, growth is going up in the US and in emerging economies (excluding China), while it is going down in other advanced economies and China.
In good news for the world overall, the IMF predicts that the era of high inflation is coming to an end.
“[The] very large global disruptions that started with the pandemic, the war in Ukraine, and triggered the largest inflation surge in 40 years are behind us,” IMF chief economist Pierre-Olivier Gourinchas told reporters.
Here, too, the US is ahead of the curve with a rate of inflation that is well below the global average.
In other words, Trump inherits an economy that is doing quite well (even excellently when compared to peer nations).
So, what could mess that up?
According to the IMF, the greatest threats to the US economy are Trump’s own policies.
Which ones? All of them!
Take tariffs, which are one of Trump’s signature policies. The IMF notes that they could have a negative effect not only on the US itself but also the rest of the world.
“An intensification of protectionist policies, for instance, in the form of a new wave of tariffs, could exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and again disrupt supply chains,” the IMF stated.
New and existing tax cuts, which Trump and the Republican majority in Congress hope to pass and extend in the first half of the year, may boost the US economy in the short term but “in the longer run, this may require a larger fiscal policy adjustment that could become disruptive to markets and the economy.”
A similar positive short-term benefit could come from deregulation, which is another priority of the incoming administration. Here, the IMF warned that moderation is imperative and that “excessive rollback of regulations designed to put limits on risk-taking and debt accumulation may generate boom-bust dynamics for the United States in the longer term, with repercussions for the rest of the world.
However, moderation is not something that Trump seems to appreciate, and he and his allies are already itching to get rid of countless regulations and even entire regulatory agencies.
Finally, the incoming administration’s plan to shut down the US border and carry out mass deportations would also have negative effects.
Or, as the IMF puts it, “Labor force disruptions driven by reductions in migration flows to the United States, may permanently reduce potential output and raise inflation during the adjustment period.”
Put it all together, and the US economy that Biden is handing over on Monday is outperforming its peers significantly; the greatest threat it faces is Trump himself.
