Kristalina Georgieva, managing director of the International Monetary Fund (IMF), has raised the alarm over growing global trade tensions, warning that deteriorating trust between nations is threatening economic growth and fuelling uncertainty across financial markets.
Speaking ahead of the release of the IMF’s latest World Economic Outlook, Georgieva said the international economic system is under immense strain as countries embrace protectionism and retreat from decades of global trade integration. She likened the current state of trade tensions to a pot that had been simmering and is now boiling over.
“To a large extent, what we see is the result of an erosion of trust — trust in the international system, and trust between countries,” she said. “Trade tensions are like a pot that was bubbling for a long time and is now boiling over.”
Georgieva said the world economy is facing an “off the charts” level of uncertainty, with rising tariffs, sweeping subsidies, and increasing geopolitical rivalry undermining investor confidence. She warned that the political brinkmanship now shaping economic decisions is stifling investment, pushing up inflation, and threatening long-term productivity.
“Uncertainty is costly. Ships at sea don’t know which port to sail to. Investment decisions are delayed. Financial markets remain volatile,” she noted.
She pointed to a sharp rise in effective US tariff rates and a global surge in non-tariff trade barriers, saying these shifts were having a disproportionate impact on emerging and low-income countries, which are more exposed to external shocks and declining aid flows.
“In a multi-polar world, national security has become a key driver of trade policy. Where things are made may matter more than how much they cost. Self-reliance is staging a comeback,” Georgieva said, cautioning that while strategic autonomy may offer short-term political gains, it ultimately undermines productivity and innovation by shielding industries from competition.
Despite these pressures, the IMF does not predict a global recession in its new projections. However, Georgieva said notable markdowns to growth forecasts and upward revisions to inflation are expected in several economies.
“Earlier this month, we saw unusual movements in some key bond and currency markets,” she said. “Such movements should be taken as a warning. Everyone suffers if financial conditions worsen.”
She called on countries to embrace domestic reforms and promote macroeconomic rebalancing to strengthen resilience. These include boosting domestic consumption in China, advancing fiscal integration in the EU, and reducing budget deficits in the United States.
Georgieva underscored the urgent need for international cooperation to prevent further fragmentation of the world economy. “We need a more resilient world economy, not a drift to division,” she said. “Trade policies must deliver a more level-playing field and cushion the blows for those who lose out.”
She concluded by stating that distributional policies are essential to bridging sound economics with good politics.
