Trade Reckoning
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Trade trends and recent developments
- For decades, world trade expanded rapidly as countries lowered tariffs and embraced globalization.
- Tariff rates fell dramatically worldwide, converging toward the low levels of the United States.
- Since the 2008 financial crisis, trade openness has stopped rising and global imports have leveled off at about a third of GDP.
- Trade tensions have escalated this year, and some major economies are reversing course, with US tariffs in April reaching the highest level in over a century.
- Other countries have responded.
Consequences and vulnerabilities
- The new trade landscape has serious consequences for the global economy.
- Many smaller, trade-reliant countries are more exposed to these shifts in trade patterns.
- Trade policy uncertainty is off the charts, making it harder for businesses everywhere to plan ahead.
Policy recommendations and strategies
- Strengthen resilience and competitiveness at home by:
- Fortifying macroeconomic fundamentals by rebuilding fiscal buffers.
- Maintaining price stability.
- Ensuring financial soundness.
- Implement reforms to boost productivity, lower barriers to private enterprise, and attract investment to help economies adapt.
- Address internal and external imbalances, particularly large deficits and surpluses, which have contributed to the rise in tensions.
- Embrace the task of building a new global economy that is more balanced and more resilient rather than seeking to preserve the old.
Attribution
- This article draws on an April 17, 2025, speech, “Toward a Better Balanced and More Resilient World,” by IMF Managing Director Kristalina Georgieva.
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