Global economy shrugs off US tariff shock, tech spending does heavy lifting

Wave of American-imposed tariffs failed to derail global growth, according to the IMF

The global economy has proved more resilient than many expected in the wake of US tariff shocks, with the International Monetary Fund now projecting worldwide growth of 3.3 percent in 2026 as a surge in AI investment helps offset trade disruption.

According to the IMF, the damage from higher US tariffs has so far been limited, with companies finding ways around the disruption by reshuffling supply chains and exports. The latest forecast is marginally stronger than in the autumn, suggesting the tariff hit has been more of a drag than a derailment.

"Remarkably, current projections are broadly unchanged from a year earlier, as the global economy shakes off the immediate impact of the tariff shock," it said.

According to the IMF, the key factor behind that resilience is a surge in technology-driven investment, particularly in the US, with AI playing a central role. In the States, IT spending now takes up a bigger slice of the economy than at any point since the early 2000s, a shift the IMF links to Washington's ability to shrug off trade headwinds better than most of its peers. On that basis, the Fund expects US growth to hit 2.4 percent in 2026, comfortably ahead of other advanced economies.

Europe, by contrast, is stuck in lower gear. The IMF expects Germany to grow by 1.1 percent in 2026, France by 1.0 percent, and the UK by 1.3 percent. While technology investment is helping prop up global growth, the Fund says the benefits are heavily skewed toward the US, leaving Europe with a more modest outlook.

Elsewhere, the picture is patchy. China is forecast to grow by 4.5 percent in 2026, while Japan barely scrapes 0.7 percent. India remains the standout at 6.4 percent, with Brazil at 1.6 percent, Saudi Arabia and Nigeria around 4.5 percent, and Russia trailing on 0.8 percent.

The IMF says this bout of growth has less to do with consumers spending freely and more to do with money flowing into new technologies. That has softened the hit from tariffs, but it also leaves growth resting on a narrower base, with AI-heavy sectors carrying much of the load.

The IMF also flags the risk on the other side of the bet. If the promised AI productivity gains fail to materialize, or if financing tightens, the same concentration that has up to now supported growth could become a problem. In that case, the Fund warns, a slowdown in tech investment would not stay contained for long.

"The current tech boom raises important upside and downside risks for the global economy," the IMF said. "On the upside, AI could start to deliver on its productivity promises, raising US and global activity by 0.3 percent this year, relative to the baseline. On the downside, AI firms could fail to deliver earnings commensurate with their lofty valuations, and investor sentiment could sour."

For now, the IMF thinks the global economy is still moving in the right direction, despite trade friction and tariff threats. Growth is being carried less by trade and more by investment, especially in technology. That has kept the numbers ticking over, but it also means the margin for error is thinner than it looks. ®