The article  was first published on OMFIF on Oct 10th, 2025.    

Mark Sobel is US Chair of OMFIF.

Frazzled and shellshocked finance ministers and central bank governors will soon descend on Washington DC for the ritual of the International Monetary Fund-World Bank annual meetings. But the global economy’s cyclical state is not likely to be uppermost on their minds.

Rather, they will come to the meetings – hosted by the heart and soul of the liberal, rules-based, multilateral order – for a trepidatious, hand-holding support group. All they rightly have cherished for the last 80 years is being torn asunder by the Donald Trump administration, lobbing its grenades from only two blocks away.

The world economic outlook looks better than during the post-Liberation Day spring meetings in April. US forecasts were then being marked down, often expecting a recession in the second half of the year amid tariff gyrations, including embargo-like tariffs on China.

But Trump backed off his steepest tariffs, earning the nickname TACO – Trump Always Chickens Out. His not-so beautiful fiscal bill will provide near-term stimulus, unemployment in a softening no-hire, no-fire job market is still consistent with full employment and the tariff hit is coming only gradually.

Regardless, the foundations of the global order are being eviscerated. The path forward is unclear.

US allies are being alienated

Trump’s tariffs are creating havoc for global trade policies. China is diversifying the geographic orientation of its massive exports, but much may be getting transshipped to America via Southeast Asia. Europeans are looking to find new markets to supplant US losses but face intense competition from China at home and abroad, while domestic demand remains weak. The US trade deficit isn’t improving – what a surprise given massive fiscal policy dissaving.

America’s closest and longstanding European allies are hugely alienated from America. The London launch of OMFIF Chairman David Marsh’s new book,  Can Europe Survive? , revealed the depth and visceral nature of European hostility towards the US government. The sentiment was that Europe can no longer trust purchasing American military hardware and especially F35s, there should be more Airbus and less Boeing, Visa and Mastercard should be booted and governments should say ‘no’ to US cloud service providers. Europe also needs to enhance co-operation with the UK on defence and limit dependence where possible on America’s military.

But will the feeling of rejection and profound distrust galvanise Europe to go boldly forward in forging a more perfect union? Deep scepticism is warranted!

Strains on the global economy

Frosty US-China relations increasingly fragment the global economy. China counters Trump’s perceived leverage by steering clear of US chips where possible, controlling the supply of magnets and rare earth minerals, and buying soybeans elsewhere. Trump seems to be pleading for a summit and deal with President Xi Jinping – but a deal involving Boeing, soybeans and TikTok rather than tackling fundamental structural problems with China’s growth model.

Fiscal excess should be a central worry, especially given recent French and Japanese bond market hiccoughs. Debt and deficits are high. Potential growth is low. Revenue growth is modest while ageing populations defend social spending. The ability of governments to deal with this fiscal arithmetic is limited and populations don’t want to hear the unpleasant reality that revenues must be raised, spending growth curtailed or, more likely, both. Who would have thought a visit from bond vigilantes would be a needed salubrious act?

Trump’s attacks on the Federal Reserve are shaking central bank independence, widely regarded as key for past successes in bringing down inflation. Trump is clear – he wants a much lower fed funds rate, in part to slash the US interest bill. This is a recipe for fiscal dominance and financial repression, disregarding that financial markets may blow out in such a scenario.

Where does the IMF go from here?

In April, US Treasury Secretary Scott Bessent — putting to the side Trumpian rhetorical flourishes — offered responsible reflections on the IMF: the Fund should get ‘back to basics’. Since then, the word ‘climate’ appears to have been banished from the Fund’s public lexicon. The US suggests it wants to see high-quality programmes. That’s a good talking point, but over the many years the US has been making this suggestion, it has never voted against weak programmes for prolonged users where it has interests, such as Pakistan and Egypt.

Bessent also said: the IMF should strengthen its work on debt sustainability and transparency .  The jury is out on this. Progress may depend importantly on bilateral creditors such as China, which has become more accommodative, but is beyond the Fund’s control. Ergo, expect to hear more Global Sovereign Debt Roundtable cheering.

Finally, Bessent said: the IMF needs to tackle global imbalances .  Earlier this year, the Fund delayed its annual US and China Article IV publications. The US Treasury posits an implausible scenario in which rising US potential growth and tariff revenue will bring the US fiscal deficit to sustainable levels.

Will an IMF seeking to stay under the Trump administration’s radar speak truth to power and call out America’s massive fiscal irresponsibility, which fuels dissaving and huge current account deficits? Will an IMF seeking to avoid aggravating relations with a woefully underrepresented Beijing unambiguously state China’s reported current account deficit is a mere fraction of reality, that the currency is massively undervalued and not sugarcoat the magnitude of the excess capacity problem?

Delegates should ask Bessent what, if anything, he’s doing to secure passage of IMF quota legislation.

In addition to all of these problems, there remain long-standing and important topics to discuss, including how the Argentine economy and Fund programme are doing and how blocked Russian assets should be used to support Ukraine.

Regardless, delegates should feel especially safe in Washington this year as they sip their fine wines and champagne in lamentation, knowing they will be greeted here and there by National Guard troops protecting the federalised Trumpian order.

Welcome to Washington.