Study Reveals That Rising Tariffs Could Lead to a Global Economic Downturn

The chief economist of the International Monetary Fund (IMF), Pierre-Olivier Gourinchas, has issued a significant warning regarding the potential impacts of increasing tariffs on global economic growth. According to Gourinchas, who spoke to the Financial Times, tariffs are detrimental to nearly everyone, emphasizing that the rising bipartisan support for tariffs from both Democrats and Republicans in the U.S. presents a worrying trend. The implications of these tariff measures could lead to adverse economic outcomes for Americans, irrespective of the election’s winner in November. The IMF’s October World Economic Outlook report anticipates a decline in U.S. gross domestic product (GDP) by 0.4% in 2025 and by 0.6% in 2026 if a considerable portion of global trade is subjected to tariffs by mid-2025.

The IMF forecasts a broader impact beyond the U.S., predicting a 0.8% decline in global GDP by 2025 and 1.3% by 2026 under scenarios in which a 10% tariff is implemented on trade between the U.S., the European Union, and China. This model also considers elements such as the extension of the 2017 Tax Cuts and Jobs Act, a decrease in net migration to the U.S. and Europe, and an increase in global borrowing costs. The ramifications suggest that the repercussions of tariffs will not be isolated but could ripple through the global economy, affecting both trade dynamics and growth rates.

In the political arena, former President Donald Trump has been particularly vocal about tariffs, initially proposing a drastic 60% tariff on Chinese goods and implementing a 10% across-the-board tariff which he later raised to 20%. Scott Lincicome, a trade policy expert at the Cato Institute, contends that Trump’s tariff proposals lack robust econometric backing and may merely cater to audience sentiment rather than reflect sound economic reasoning. Lincicome notes that while Trump’s plans may pose significant risks to the economy, the tariff strategy presented by Vice President Kamala Harris is less defined, characterized by a series of shifts in her stance.

Harris has oscillated on the issue of tariffs, having presided over the continuation of Trump-era tariffs and even introduced new tariffs during her tenure. Prior to facing Trump in a presidential debate, Harris’s campaign indicated a willingness to implement “targeted and strategic tariffs” aimed at bolstering American workers and holding adversaries accountable. However, her lack of a clear opposition to existing tariffs raises questions about her commitment to this position. The prevailing view in Washington suggests that supporting tariffs has become conventional wisdom, even if public opinion does not entirely align with this sentiment.

Lincicome argues that the vital votes that determine election outcomes are often found in swing areas where constituents favor tariffs, driving political candidates from both parties to adopt pro-tariff positions to court these important voters. This bipartisan inclination toward tariff policies, despite potential economic drawbacks highlighted by the IMF, indicates that significant costs may be inflicted on American consumers and businesses. As tariffs are projected to drive up prices and stifle economic growth, the American populace stands to lose irrespective of political allegiance or electoral results.

In conclusion, the potential for increased tariffs presents a troubling economic scenario that could hinder growth within the U.S. and globally. The IMF’s predictions underscore the negative consequences of tariff policies, highlighting the urgent need for political leaders to evaluate the impacts of their proposed economic strategies carefully. The bipartisan support for tariffs, while politically expedient, may lead to a challenging economic landscape for Americans if action is not taken to avoid the pitfalls associated with such policies. As the electoral climate intensifies, it remains crucial for voters to consider the longer-term economic implications of tariff strategies being put forth by candidates on both sides of the political spectrum.