An unexpectedly sturdy world economy is likely to shrug off President Donald Trump's protectionist trade policies this year, thanks partly to a surge of investment in artificial intelligence in North America and Asia, the International Monetary Fund said in a report out Monday.
The 191-nation lending organization expects that global growth will hold steady at 3.3% this year, up from the 3.1% it had forecast for 2026 back in October. This would be the same pace of growth as in 2025.
The fund forecast 2027 growth at 3.2%, unchanged from the previous forecast. It has revised global growth rates higher since last July in response to trade deals that have reduced Trump's tariff rates that peaked in April 2025.
"We find that global growth remains quite resilient," IMF chief economist Pierre-Olivier Gourinchas told reporters, adding that the fund's 2025 and 2026 growth forecasts now exceed predictions made in October 2024, before Trump was elected to a second term.
"So, in a sense, the global economy is shaking off the trade and tariff disruptions of 2025 and is coming out ahead of what we were expecting before it all started," Gourinchas said.
He said businesses have been able to adapt to higher U.S. tariff rates by rerouting supply chains, while trade agreements have lowered some duties and China has shifted exports to non-U.S. markets. The latest IMF forecasts assume an effective U.S. tariff rate of 18.5%, down from about 25% in the fund's April 2025 forecast.
The IMF estimated U.S. growth for 2026 at 2.4%, up 0.3 percentage points from October, due in part to a big push from massive investment in artificial intelligence infrastructure, including data centers, powerful AI chips and power. The IMF edged its 2027 growth forecast a tenth of a point lower to 2%.
The IMF also said technology investment was boosting activity in Spain, which saw a 0.3 percentage point upgrade to its 2026 GDP forecast to 2.3%, and in Britain, where the IMF kept its forecast unchanged at 1.3% for 2026.
AI boom poses risks
Gourinchas said the AI boom poses risks for heightened inflation if it continues at its breakneck pace. But he added that if expectations that AI-driven productivity gains and profits are not realized, this could spark a correction in high market valuations that could crimp demand.
The IMF report lists AI as among risks that are tilted to the downside, along with disruptions to supply chains and markets from geopolitical tensions and new flare-ups in trade tensions.
A Supreme Court decision against Trump's broad tariffs under an emergency sanctions law, expected in the coming days or weeks, "would inject another dose of trade policy uncertainty into the global economy" if Trump resurrects new tariffs under other trade laws, Gourinchas said.
But the IMF said that AI represents significant upside for the global economy if the investment surge leads to rapid adoption and productivity gains are realized and boost business dynamism and innovation.
"As a result, global growth may be lifted by as much as 0.3 percentage points in 2026 and between 0.1 and 0.8 percentage points per year in the medium term, depending on the speed of adoption and improvements in AI readiness globally," it added.
Among forecasts for other major economies, the IMF said China's 2026 growth would reach 4.5%, down from a stronger-than-expected 5% performance in 2025, but 0.3 percentage points higher than October estimates.
The upgrade reflects a 10 percentage point reduction in U.S. tariff rates on Chinese goods for a year, as well as continued diversion of exports to other markets such as Southeast Asia and Europe.
Gourinchas said that China risks running into more protectionist trade policies unless it develops a more balanced growth model that relies less on exports and more on internal demand.
Europe projection slightly up
The IMF forecast eurozone growth at 1.3% for 2026, up 0.1 percentage point from the October estimate, driven by increased public spending in Germany and stronger performances in Spain and Ireland.
The fund kept its 2027 eurozone growth forecast unchanged at 1.4%, noting that planned European increases in defense spending would materialize only in later years.
The projection for the German economy has been lifted to 1.1% for 2026. It is 0.2 percentage points above the IMF's previous estimate but remains under the German government's own prediction of a 1.3% expansion.
Germany's economy, Europe's largest, rebounded marginally last year after consecutive years of recession, but it remained well behind its partners in the Group of Seven advanced economies, with growth hitting just 0.2%.
However, experts expect activity to pick up this year due to a massive program of government investment in defense and infrastructure, as well as rising domestic demand linked to stable inflation and wage rises.
Japan also saw a slight upgrade to 2026 growth due to its new government's fiscal stimulus package, but Brazil was a notable outlier to the improvement trend, with a 0.3 percentage point reduction in its 2026 growth rate to 1.6% since October. IMF officials attributed the downgrade largely to tighter monetary policy needed to fight a flare-up in inflation last year.
India, which has supplanted China as the world's fastest-growing major economy, is expected to see growth decelerate from 7.3% last year to 6.4% in 2026.
Inflation to keep falling
The IMF said that globally, inflation was forecast to continue to decline, from 4.1% in 2025 to 3.8% in 2026 and 3.4% in 2027. Gourinchas said this leaves room for a more accommodative monetary policy that will help underpin growth.
Looking ahead, Gourinchas stressed the need for central bank independence so that they can pursue their mandate of price stability and financial stability.
He did not comment on an ongoing U.S. Justice Department probe into Federal Reserve Chair Jerome Powell.
But he noted that the importance of the U.S. dollar for the international monetary system means it is "even more important" that the Fed is able to do its job and do it well.