Global Growth Survived the Tariff Shock. That Does Not Mean It Won

The global economy has proved more resilient to the 2025 trade shock than many expected. But resilience and strength are not the same thing.

On July 29, the IMF raised its forecast for global growth to 3.0% in 2025 and 3.1% in 2026. The upgrade came despite the tariff shock, partly because businesses had accelerated imports ahead of tariff increases and because effective tariff rates ended up lower than initially feared.

That creates an important distinction.

The global economy has avoided the worst-case scenario.

It has not necessarily returned to normal.

The IMF estimates that the US effective tariff rate had fallen to 17.3%, compared with 24.4% in its April assumptions. That reduction helped improve the outlook.

Financial conditions also improved, while China experienced stronger-than-expected first-half activity.

But the upgrade comes with a warning.

Some of the strength is temporary.

Businesses that imported goods early to avoid future tariffs pulled activity forward. Once those inventories are built, that source of growth disappears.

There is also the question of prices.

The IMF projected global inflation at 4.2% in 2025, declining to 3.6% in 2026. In the United States, however, tariff-related price increases could keep inflation above the Federal Reserve's target.

That creates a difficult policy environment.

If inflation stays high, central banks have less room to cut interest rates.

If interest rates remain high, borrowing stays expensive.

If borrowing remains expensive, investment and consumption can weaken.

This is why the tariff story is not simply about trade.

It is a monetary-policy story, an investment story and ultimately a growth story.

The global economy has absorbed the initial shock partly because companies and governments have adapted.

But adaptation is not free.

Supply chains are being redesigned. Businesses are carrying more inventory. Firms are paying for alternative suppliers. Governments are negotiating new trade agreements.

All of these responses can make the global economy more resilient.

They can also make it more expensive.

The real test of the IMF's upgraded forecast will come after the temporary boost from front-loaded trade disappears. If growth remains near 3% without that support, the global economy has genuinely adapted. If it falls sharply, July's optimism may have arrived too early.