IMF Upgrades U.S. Growth Forecasts Amid Lower Tariffs and New Bill

The International Monetary Fund (IMF) has revised its growth projections for the U.S. economy, attributing this increase to a reduction in trade tensions and fiscal incentives from the One Big Beautiful Bill Act. In its latest World Economic Outlook (WEO) report, published on July 29, 2023, the IMF anticipates that the U.S. economy will expand by 1.9 percent in 2025 and 2 percent in 2026. This marks an increase of 0.1 and 0.3 percentage points, respectively, from its previous April forecasts.

The IMF’s report highlights a significant decline in the effective U.S. tariff rate, projecting it to drop to 17.3 percent from an earlier estimate of 24.4 percent. This shift is expected to alleviate some of the financial pressures businesses have faced. Additionally, a weaker dollar has created looser financial conditions, further contributing to the positive outlook.

The One Big Beautiful Bill Act, which received backing from former President Donald Trump, is estimated by the IMF to potentially boost U.S. economic output by approximately 0.5 percent on average through 2030. This legislation introduces a range of incentives aimed at stimulating corporate investment, which is anticipated to fuel economic growth.

Despite the optimistic revisions, the IMF has cautioned that risks associated with tariffs and persistent inflationary pressures remain. The organization emphasized that while the current economic landscape appears more favorable, vigilance is required to navigate these ongoing challenges.

Overall, the IMF’s updated forecasts reflect a cautious optimism towards the U.S. economy, driven by reduced trade barriers and proactive fiscal measures. As the global economic environment continues to evolve, the effectiveness of these policies will be critical in sustaining growth and mitigating risks.