The International Monetary Fund expects the global economy to slow further in the coming years, even though the threat of tariff wars has proved less damaging than previously forecast. According to the Fund, global prospects now look slightly better than they did at the start of 2025, but worse than a year ago. The IMF doubts that the investment boom in artificial intelligence can offset the negative effects of tariffs in the short term and warns of risks to the financial system if the technology sector becomes overvalued.

The IMF forecasts that the global economy will continue to slow in the coming years, even though the threat of tariff wars has turned out to be less destructive than earlier feared.

According to the Fund, global prospects appear somewhat brighter than they did at the beginning of 2025, but dimmer than a year ago. At the same time, the IMF doubts that the rapid surge of investment in artificial intelligence can offset the negative tariff effects in the short term and warns of a potential correction in the overheated tech market.

“Despite multiple offsetting drivers, the tariff shock is further dimming already lacklustre growth prospects,” IMF Chief Economist Pierre-Olivier Gourinchas wrote in a blog accompanying the new forecasts. “Even in the United States, growth is weaker and inflation higher than we projected last year—classic signs of a negative supply shock,” he said.

The IMF projects global growth of 3.2% in 2025 and 3.1% in 2026. While this is an improvement over July’s forecast, it remains a combined 0.2 percentage points below last year’s projections. For the United States, the Fund expects growth of 2% in 2025—a marked slowdown from 2.8% the previous year. Although this figure is slightly stronger than spring and summer estimates, it still falls short of last year’s 2.2% forecast.

The main reason performance has exceeded expectations is investment in artificial intelligence and the partial easing of tariffs imposed by the United States. However, the IMF cautions that the AI investment boom itself carries one of the key risks for the global economy.

“Markets could correct sharply, especially if AI technologies fail to deliver the lofty profit expectations,” Gourinchas noted. He added that “a further surge in enthusiasm could require tighter monetary policy, as happened in the late 1990s during the dot-com era. This would reduce household wealth and restrain consumption, which could in turn weigh on the financial system.”

At the same time, the IMF notes that AI deployment could become a growth-supporting factor—provided it is not undermined by ongoing trade conflicts. “Under moderate assumptions, the combined effect of reduced uncertainty, lower tariffs and AI development could boost global GDP by about 1% in the short term,” Gourinchas said. Restoring tariffs to pre-Trump levels could, according to the Fund, add roughly 0.3 percentage points to global growth.

Meanwhile, renewed tensions between the United States and China highlight the fragility of global trade. Last week, Trump threatened to impose an additional 100% tariff on all Chinese goods starting November 1 if Beijing tightens export restrictions. A few days later, he said that “everything will be fine” with China—but did not withdraw the tariff threat.