Global economy shrugs off tariff shock: IMF

The global economy has shown “notable resilience” despite significant US-led trade disruptions and heightened uncertainty, with growth projected to hold steady at 3.3 per cent in 2026, the International Monetary Fund (IMF) said on Monday.
In a blog published alongside its January 2026 World Economic Outlook Update, the IMF stated global growth has remained broadly unchanged from a year earlier, as the world economy “shakes off the immediate impact of the tariff shock,” helped by easing trade tensions and strong technology-driven investment.
The IMF said the latest projections represent an upward revision of 0.2 percentage points compared to October estimates, with most of the improvement accounted for by the United States and China. Global growth is projected at 3.3 per cent in 2026 and 3.2 per cent in 2027.
A key driver of resilience has been a surge in investment in information technology, particularly artificial intelligence.
The IMF noted that IT investment as a share of US economic output has surged to its highest level since 2001, providing a major boost to business investment and activity, with positive spillovers to global trade, especially Asia’s technology exports.
While manufacturing activity remains subdued, favourable financial conditions and robust earnings have supported rising stock prices and helped fund new capital spending, the report said. However, the IMF cautioned that increasing reliance on debt financing has raised leverage, which could amplify shocks if returns fail to materialise or financial conditions tighten.
The Fund said profitability in the technology sector could also become sensitive to depreciation assumptions for advanced processors, as frequent equipment upgrades squeeze margins and require additional borrowing.
Comparing the current tech boom with the dot-com era, the IMF said potential overvaluation in US equity markets is “only about half that of the dot-com episode,” but warned that vulnerabilities remain due to the concentration of gains in a narrow group of AI-related firms.
Meanwhile, the IMF has also cautioned that the global economy’s growing dependence on artificial intelligence-driven investment could expose markets to fresh shocks, even as the technology boom supports growth in the near term.
In its blog, the IMF stated the current expansion has been helped by heavy investment in information technology, particularly artificial intelligence, but warned that expectations around future returns may prove fragile.
“Should expectations about AI-driven productivity gains turn out to be overly optimistic and outcomes disappoint, a sharp drop in real investment in the high-tech sector, as well as in spending on AI adoption in other sectors and a more prolonged correction in stock market valuations — which have increasingly been lifted by only a few technology firms — could ensue,” it said.
According to the IMF, rapid adoption of AI, possibly facilitated by the ongoing surge in AI-related investment in both hard and soft infrastructure, could significantly improve productivity and boost medium-term growth prospects sooner rather than later.