IMF Trump's tariff threats risk ‘spiral of escalation’

Donald Trump’s tariff threats over Greenland risk triggering a “spiral of escalation” that would damage the world economy and lead to a sharp selloff in financial markets, the International Monetary Fund (IMF) says.

- Richard Partington Senior economics correspondent

In an update as Trump threatened to impose tariffs on Nato allies opposed to his ambition to take over the Arctic territory from Denmark, the Washington-based fund said a renewed eruption in trade tensions was among the biggest risks to global growth in 2026.

Pierre-Olivier Gourinchas, the IMF’s chief economist, said a “spiral of escalation” between the US and Europe would have a “material impact” that would inflict pain on households on both sides of the Atlantic. “We all know there are no winners in a trade war and that’s the thing to remember,” he said.

Speaking at the launch of the Washington-based fund’s updated world economic outlook (WEO) report, Gourinchas called for both sides to find an amicable solution. “If we were to enter a phase in which there were escalation, and tit-for-tat policies, that would certainly have an even more adverse effect on the economy,” he said.