Trump tariff risks could push global debt to post-World War II levels, warns IMF

IMF fears Donald Trump’s tariff policy may accelerate global debt crisis amid growing economic uncertainty.

Vitor Gaspar, director of fiscal affairs at the International Monetary Fund (IMF), speaks during a Fiscal Monitor news conference at the IMF and World Bank Group annual meetings in Washington, D.C., on October 16, 2019. Photo by Andrew Harrer/Bloomberg

By Anna Fadiah and Hayu Andini

Donald Trump’s controversial trade policy and renewed focus on tariffs are raising alarms across the global economic landscape, with the International Monetary Fund (IMF) warning that the resulting trade turmoil could drive public debt to levels unseen since the aftermath of World War II. According to Vítor Gaspar, director of the IMF’s fiscal affairs department, Trump tariff risks are reshaping global fiscal forecasts, potentially pushing the global debt-to-GDP ratio to a staggering 117% by 2027 — and that’s the IMF’s best-case scenario.

Speaking to the Financial Times, Gaspar outlined a sobering picture for world economies. He noted that the IMF’s models, calculated in late 2024, may already be outdated as trade and geopolitical tensions have intensified sharply in 2025. He stressed that these conditions — worsened by tightening financial markets and increased volatility — could significantly amplify debt vulnerabilities.

“Uncertainty sharply rose in 2025,” Gaspar said. “Trade and geoeconomic uncertainties escalated, financing conditions tightened, and spending pressures have intensified.”

IMF outlook warns of historic debt burden

In its latest Fiscal Monitor, published on Wednesday, the IMF warned that a 117% global debt-to-GDP ratio would mark the highest peacetime figure since 1946. That year, in the immediate wake of World War II, global debt hit 150% before gradually declining during the following decades. The current trajectory, driven in large part by protectionist trade policies such as Trump’s tariff measures, could reverse that trend.

Public debt across the globe has already surpassed $100 trillion as of 2024, a record high. With major economies like the United States, China, Germany, France, Italy, and the United Kingdom all expected to see their debt burdens grow in 2025, the IMF has urged governments to brace for a more fiscally constrained future.

Gaspar said the current global debt situation is “high, rising and risky,” and warned that the Trump tariff risks may be significantly underappreciated in current models.

Trump's tariff policies sow economic instability

Much of the concern centers on Trump’s trade policy, which he reintroduced with a hardline stance in early 2025. Announced on April 2, these new “reciprocal” tariffs initially took global markets by surprise. Though most of the proposed levies are now on pause as negotiations with major trading partners continue, the underlying uncertainty remains deeply unsettling for markets and governments alike.

Investors briefly found relief when U.S. Treasury Secretary Scott Bessent indicated that the current tariff confrontation with China — which includes U.S. tariffs of 145% and retaliatory Chinese tariffs of 125% — is “unsustainable.” Trump echoed these sentiments, stating that the tariffs on Chinese imports would likely be “substantially” reduced. Yet, such statements have done little to reverse the broader financial damage inflicted by rising trade tensions.

Global fiscal pressure building

The IMF’s fiscal projections suggest that countries representing roughly 75% of the world’s GDP will experience increased debt burdens in 2025 compared to the previous year. While many of these nations are advanced economies with access to capital markets, the long-term consequences of sustained public borrowing are growing more acute.

Gaspar emphasized the need for all governments — especially those facing higher risk premiums — to focus on fiscal responsibility. “Countries should double down on efforts to put their fiscal house in order,” he said, citing the combination of debt buildup, trade disruptions, and volatile financial conditions as dangerous accelerants.

German and French responses to fiscal challenges

Despite the grim backdrop, some European countries have shown signs of prudent adaptation. Gaspar welcomed Germany’s recent decision to relax its longstanding “debt brake” policy, which traditionally limits borrowing. This move, he noted, could allow Germany to boost public investment in key infrastructure projects while maintaining long-term fiscal sustainability.

“This gives flexibility to a country that has low debt levels, compared with the standard of advanced economies, to spend more,” Gaspar said. He underscored that Germany’s economic strength and credibility should shield it from significant market backlash.

France also received praise for progress in budget negotiations. Gaspar described recent steps by French authorities as “very promising,” noting that market confidence had improved following the approval of national spending plans. “It is a move in the right direction,” he said.

Tariff-driven debt risk looms globally

What remains clear is that the Trump tariff policy — designed to strengthen American industry and reduce dependence on foreign goods — is triggering unintended consequences with potentially global reach. The policy shift has disrupted global supply chains, increased the cost of essential imports, and now threatens to exacerbate an already critical global debt crisis.

Even if diplomatic efforts in the coming months manage to reduce some of the headline tariffs, the financial damage and uncertainty created by the abrupt policy shift will likely linger. Economists warn that the erosion of trust between trading nations — and the reconfiguration of global trade networks — could slow global growth for years to come.

The IMF’s warning, therefore, serves as more than a technical forecast. It is a call for leaders, particularly those in the United States, to weigh the broader implications of trade measures like tariffs on a globalized financial system.

As Vítor Gaspar concluded, “In this period of high uncertainty, fiscal prudence and international cooperation are more vital than ever.”