International Monetary Fund Managing Director Kristalina Georgieva attends a press briefing at the IMF/World Bank Annual Meetings in Washington, D.C., U.S., October 16, 2025. REUTERS/Elizabeth Frantz

By Andrea Shalal and David Lawder

WASHINGTON (Reuters) -International Monetary Fund chief Kristalina Georgieva on Thursday urged member countries to keep trade as an engine of growth for the world economy despite President Donald Trump's steep new tariffs, warning that a larger-scale trade war could have negative consequences.

Georgieva, speaking to reporters at the annual meetings of the IMF and World Bank, mapped out a sober view of a global economy that was doing better than feared when IMF and World Bank members last gathered in Washington in April, but still faced many risks, including inflation, high debt and growing unrest in countries around the world.

The IMF is predicting global real GDP growth of 3.2% for 2025, down from 3.3% in 2024, but up slightly from a July forecast of 3.0% and a more severe April forecast of 2.8% that came after Trump imposed tariffs on nearly every country in the world, triggering a tit-for-tat escalation with China.

The relative calm of recent months was shattered last week when China imposed new export controls on rare earth metals needed for the technology sector, and Trump responded by imposing new 100% duties on Chinese imports.

Georgieva, the IMF's managing director, noted that so far only three countries - the United States, China and Canada - had raised tariffs, and she was urging countries to exercise restraint to avoid fallout such as higher inflation, lower growth and employment effects.

"If there is a flare-up of trade tensions, that would, of course, have a negative impact," Georgieva said. "This is why we are saying ... please don't do that. It is not a healthy action."

"The largest economy in the world has chosen to use tariffs as an instrument in relations with partners," Georgieva said of the U.S. "Here is the interesting fact today, the rest of the world has not followed so far."

MOST IMF MEMBER STATES HAVE NOT RAISED TRADE BARRIERS

Georgieva said out of 191 IMF member countries, 188 have chosen not to retaliate and are trading more among themselves.

"India has still maintained some barriers to trade. There are tariffs that India imposes, there are some restrictions. And it is good to think about, where do we want to go? Do we want to go in the direction of maintaining and increasing these restrictions, or do we want to go the other way?"

She said India's relations with the European Union seem to be signaling a desire to trade more with other countries.

Georgieva said in the briefing that countries with large external surpluses like China need to rely more on domestic consumption than exports, while countries with big fiscal deficits, like the United States, need to reduce them, to help the overall economy.

Georgieva also addressed the two-edged sword of artificial intelligence, noting that booming investment in the technology, concentrated mostly in the U.S., could contribute between 0.1% and 0.8% to global growth, but could also cause more divergence between rich and poor countries.

"If we were to extract that kind of boost of growth, that would be very significant for the world," she said.

"The risk is that we may end up in a world where there is increasing productivity, but it is also a source of divergence within countries and across countries," she said.

Georgieva said public debt is at near-record highs and still climbing and excessive imbalances were plaguing many countries, with uncertainty rising and triggering social unrest in many places.

"The force of change is making the global economy less predictable, and it is impacting people. People are anxious, They're taking to the streets to demand better opportunities," she said.

(Reporting by David Lawder and Andrea Shalal; Editing by Toby Chopra and Andrea Ricci)