The global economy is navigating a period of unprecedented uncertainty, highlighted by tariff tensions, AI market speculation, and geopolitical risks, according to IMF Managing Director Kristalina Georgieva.
Her warning that “uncertainty is the new normal” has been underscored by Donald Trump’s latest tariff threats against China, following Beijing’s restrictions on rare-earth exports, which triggered a sharp sell-off in global markets.
Trump Tariffs Add New Economic Pressure
Trump announced 100% punitive tariffs on Chinese goods, escalating tensions with China. The move comes just as finance ministers and central bankers prepare to meet in Washington for the IMF and World Bank annual meetings.
Georgieva highlighted that the global economy has remained resilient, partly due to companies front-loading inventories and adjusting supply chains ahead of expected tariffs. Additionally, many countries have formed new trade connections bypassing the US, creating what experts call a “new economic geography.”
Global Trade Shows Resilience
Data from the UN Conference on Trade and Development (UNCTAD) indicates that global trade expanded by over $500 billion in the first half of 2025, despite rising policy uncertainty and geopolitical tensions. Much of this growth has been driven by developing countries.
UNCTAD also noted the rise of “friendshoring”, a strategy of trading with trusted geopolitical allies, a concept promoted by former US Federal Reserve Governor Janet Yellen.
“Trade growth remained positive, demonstrating that global markets continue to adapt despite challenges,” UNCTAD reported.
AI Boom Masks Economic Weakness
Markets have been further buoyed by a surge in AI-related investment, particularly in generative AI technologies. According to the World Trade Organization, AI-related goods such as semiconductors, servers, and telecom equipment accounted for 20% of global goods trade growth in the first half of 2025.
Ben May of Oxford Economics noted, “The surge in US capital spending for AI has masked weakness in other parts of the domestic economy.”
However, experts caution that AI valuations may be overinflated, drawing comparisons to the dotcom bubble of the early 2000s. The Bank of England warned that a sudden correction in AI markets could have global repercussions, particularly for equity markets and dollar-denominated assets.
Risks Beyond Trade and AI
The IMF chief also highlighted additional threats to global economic stability:
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Unfunded tax cuts and policy shifts in the US undermining market confidence.
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Geopolitical tensions impacting trade and investment flows.
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The risk of financial market shocks should AI and tech valuations decline sharply.
Georgieva urged policymakers and investors to “buckle up”, emphasizing that while the global economy shows resilience, the tests ahead may be severe.
Key Takeaways
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Trump’s tariffs on China escalate global trade tensions.
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Global trade remains robust, driven by developing countries and friendshoring.
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AI investment boom boosts markets but carries risk of overvaluation.
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IMF warns of multiple threats: trade wars, AI bubble, and policy instability.
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Georgieva’s message: Prepare for volatility as global economic resilience is untested.
