The International Monetary Fund (IMF) has slightly raised its global growth projections for 2025 and 2026, crediting stronger-than-expected purchasing activity ahead of looming US tariff hikes and a dip in the country’s effective tariff rate. But the Fund warned the world economy is still under strain and faces serious risks if tariffs rebound or geopolitical tensions flare.

In its updated World Economic Outlook published Tuesday, the IMF said global growth is now expected to hit 3% in 2025, up 0.2 percentage points from its April forecast, and 3.1% in 2026, a 0.1-point increase. That’s still well below the pre-pandemic average of 3.7%.

“The world economy is still hurting, and it’s going to continue hurting with tariffs at that level, even though it’s not as bad as it could have been,” IMF chief economist Pierre-Olivier Gourinchas said.

The IMF noted that the effective US tariff rate — calculated as import duty revenue over total goods imports — has eased to 17.3% from April’s 24.4%, but remains dramatically higher than the 2.5% level seen at the start of 2025. In comparison, the rest of the world is averaging around 3.5%.

US President Donald Trump’s universal 10% tariff, imposed in April, along with threats of even steeper duties from August 1, have rattled global trade flows. Additional US tariffs on autos, steel, pharmaceuticals, and chips are expected soon but were not factored into the IMF’s latest figures.

Global headline inflation is projected to fall to 4.2% in 2025 and 3.6% in 2026, but the IMF warns that in the US, inflation will likely stay above target as higher tariffs pass through to consumer prices later this year.

Gourinchas said the current growth bump is largely due to “front-loading,” as businesses rush to stock up before higher tariffs kick in:

“There’s been a tremendous amount of purchasing in advance. That won’t last forever.”

Despite the slight forecast upgrade, the IMF stressed that the global economy remains fragile. Potential risks include:

• Tariff escalation if upcoming US-China talks in Stockholm fail to extend the August 12 truce.
• Geopolitical tensions, especially in major trade routes.
• Ballooning fiscal deficits, which could drive up interest rates globally.

Recent trade deals between the US, EU, and Japan setting 15% tariffs came too late to be included in the July forecast. Gourinchas said they appear similar to the current 17.3% rate but warned the IMF is unsure if they will stick.

“We’ll have to see whether these deals are sticking, whether they’re unravelled, whether they’re followed by other changes in trade policy,” he said.

IMF simulations show that if the maximum tariffs announced in April and July are fully implemented, global growth in 2025 could be 0.2 percentage points lower than currently projected.

For now, the Fund says resilience is holding up, but the underlying strength of the global economy is being masked by “distortions from trade, rather than underlying robustness.”

With input from Al Jazeera