IMF Warns U.S. Economy Faces Inflation Risks Due to Trump Tariffs

The International Monetary Fund (IMF) has issued a warning that the U.S. economy is facing increasing pressure and heightened inflation risks due to the tariffs imposed by the Trump administration. The IMF noted that after years of recovery, the U.S. economy is showing signs of strain, with domestic demand and job growth slowing down.

The IMF spokesperson highlighted that while inflation is moving towards the Federal Reserve's 2% target, there are risks that could push it higher. These risks are primarily attributed to the tariffs on imported goods implemented by the Trump administration. The spokesperson explained that the economy has shown resilience in recent years, but there are now clear signs of pressure, with domestic demand and job growth decelerating.

In the first half of the year, the economy experienced some volatility due to the anticipation of tariffs, which led to early imports. Currently, these tariffs are exacerbating inflation risks. The IMF believes that the Federal Reserve still has room to cut interest rates but should proceed with caution, closely monitoring the latest data.

Earlier this summer, the IMF's economic advisor and research director described trade conditions as "unstable," emphasizing the potential for negative supply disruptions. He warned that without a comprehensive agreement, ongoing trade uncertainty could increasingly pressure investment and economic activity. Although exports have so far supported global economic activity, if demand for inventory goods does not materialize, businesses could become vulnerable.

Additionally, the IMF spokesperson pointed out that the recent downward revision of U.S. employment data was "slightly larger than" the historical average. This revision means that non-farm employment positions are increasing by an average of about 71,000 per month, rather than 147,000. This is the largest revision on record.

The spokesperson suggested that such revisions could be influenced by various factors, including statistical issues and problems related to survey responses and errors. The organization plans to discuss this issue during its November meeting with U.S. officials.

In response to the significant downward revisions in U.S. employment data for May and June, which angered the Trump administration, the U.S. Labor Department's Office of Inspector General initiated a review. This review aims to assess the challenges faced by the Bureau of Labor Statistics in collecting and reporting economic data.

The IMF spokesperson declined to comment on the credibility of U.S. data, emphasizing the organization's strong advocacy for all member countries to provide accurate, timely, and reliable data. "This data transparency enhances the credibility of economic management in all countries," the spokesperson stated.