IMF World Bank Annual Meeting confronts the "triple storm": resurgence of tariff disputes, debt tsunami, and hidden concerns about AI bubbles.

Currently, American consumers continue to spend, businesses are absorbing higher costs, and the AI boom has generated a new wave of market optimism. The global economy has managed to withstand the largest tariff shock from the United States since the 1930s. However, the latest threat by President Donald Trump to impose massive tariffs has once again raised concerns about a new blow to the global economy. At the same time, warnings about the surge in government debt and a tech stock bubble have become increasingly strong, with multiple risks overlapping and posing significant challenges to the global economy. These concerns will be the focus of this week's meetings of central bank governors from various countries the meetings are taking place in Washington and are an important part of the annual meetings of the International Monetary Fund (IMF) and the World Bank. In addition, discussions on various topics, including the $20 billion aid provided by the United States to support the Argentine peso, will also be important during the meetings. The backdrop of policymakers gathering in Washington this time is not only the new trade tensions between the top two global economies but also the political instability in countries from France to Japan. Looking back to when they last attended a meeting in Washington in April, the global economic outlook was much bleaker. At that time, Trump announced plans for "Liberation Day" tariffs, causing market volatility, and policymakers were concerned that the global economy would slide into a recession, manifested in frequent trade retaliations, high inflation, and shrinking investments. However, in the past six months, most economic data have exceeded expectations, with the performance of the United States, the world's largest economy, particularly strong. The US GDP growth rate in the second quarter hit a near two-year high. Despite the setback in the market caused by Trump's new tariff threat last Friday, the S&P 500 index has still risen by 32% since its low in April. The key factors supporting the improvement in both the stock market and the real economy are the development of artificial intelligence (AI) and record investments in data centers to support cloud computing. So far, businesses have coped with the tariff disruptions by increasing inventory in the short term and accepting narrower profit margins (rather than passing on the higher tariff costs to consumers). Harvard University economics professor and Peterson Institute for International Economics researcher Karen Dynan said at a briefing last week, "This resilience is welcome, but I think it is difficult to sustain. The trend of global economic growth slowing down is about to show." Last Friday, Trump announced that he would impose an additional 100% tariff on Chinese goods starting on November 1, but also acknowledged that if China abandoned the rare earth control measures in its threat, he might give up on this escalation. The latest forecast from Bloomberg Economics shows that global economic growth will slow down next year. Economists predict that the global real GDP growth rate in 2025 will remain at 3.2%, the same as last year, and will drop to 2.9% in 2026. Soaring Debt The increasing debt in advanced economies and emerging economies will be one of the core topics during the Washington meetings. Data from the Institute of International Finance (IIF) shows that global debt increased by over $21 trillion in the first half of this year, reaching a historical high of nearly $338 trillion, comparable to the peak during the COVID-19 pandemic. Efforts by the Trump administration later this month to support the Argentine economy before the midterm elections will also be a key topic of discussion during the meetings. In April this year, the IMF agreed to provide more loans to Argentina, a decision that was widely opposed within the IMF at the time. Currently, the IMF Managing Director, Georgieva, is still involved in recent talks between US and Argentine officials. It turns out that US job growth is far below expectations, and corporate hiring is slowing down the US manufacturing sector has experienced job losses for four consecutive months. The Chinese Manufacturing Purchasing Managers' Index (PMI) fell for the sixth consecutive month in September, marking the longest contraction period since 2019. Germany's economic contraction in the second quarter was much worse than the initial estimates, with its export-dependent car factories facing deep trouble. The World Trade Organization (WTO) stated on October 7 that global commodity trade growth is expected to significantly slow down next year due to the delayed impact of Trump's tariff policies. The Geneva-based organization predicts that global commodity trade volume will grow by only 0.5% in 2026, far below this year's 2.4%. Frederick Neumann, Chief Asian Economist at HSBC HOLDINGS (HSBC) in Hong Kong, said, "The resistance facing the global economy is increasing continuously. Although people tend to think that US tariffs will not affect global export volumes, the inevitable backlash from early stockpiling now seems unavoidable." Currently, one of the biggest questions is whether eventual price increases will drag down US consumer spending and have a chain effect on the global economy. Citi Group's Global Chief Economist Nathan Sheets pointed out that while concerns about the impact of tariffs on global economic activities were present earlier this year, the actual impact is smaller and shorter-lived. However, another wave of impact may be on the way. In a recent report, Sheets and his colleagues wrote, "The impact of tariffs is becoming increasingly apparent, which could further weaken US consumer spending and import demand." They predict that global economic growth will slow to below 2% in the second half of this year and increase to 2.5% in 2026. Stephen Jen, CEO of Eurizon SLJ Capital, said that based on past experiences of import price shocks, tariff shocks may need 6 to 8 quarters to affect consumption and push US economic growth close to zero. In a recent report, he wrote, "The tariff impact has been broken down into about six times, each time with a 2% import price impact, rather than a one-time 13% 'tsunami' impact." Mike Brennich, head of Seattle-based Acme Food Sales Inc., also warned that the impact of tariffs is not over yet. The company imports various types of food such as canned tuna and coconut water for major retail chains in the United States. So far, Brennich has absorbed some of the tariff costs and passed on some costs to consumers. But he warned that food prices will continue to rise in the future. He said, "There are not many certainties in life, but I can guarantee that the prices of products on grocery store shelves will definitely increase, it is inevitable." Vulnerability in the Tech Industry Another immediate concern is the fading of the AI boom. In a speech last Wednesday, IMF Managing Director Georgieva said, "The valuations of tech stocks are approaching levels seen during the Internet boom of 25 years ago." This statement clearly refers to the bursting of the internet bubble in 2000. "If there is a significant pullback, financial tightening could drag down global economic growth, expose various risks, and have a particularly severe impact on developing countries." Scenarios simulated by the Oxford Economics show that if growth in the US tech industry slows down, it will lead the world's largest economy to the brink of recession, with global economic growth falling from the baseline prediction of 2.5% to 2% by 2026 the actual impact may even be greater. Therefore, economists are not only focusing on the continuing uncertainty related to tariffs but are also increasingly vigilant to the vulnerability in the tech industry. Alexis Crow, Chief Economist at PwC's US region, said that the AI boom may not necessarily become a long-term engine for economic growth. She noted, "It remains uncertain whether this investment boom can sustained productivity gains, thereby driving significant economic growth."