IMF Urges U.S. to Slash Fiscal Deficit for Economic Stability

The International Monetary Fund (IMF) has urged the United States to tackle its growing fiscal deficit to help reduce its substantial current account and trade deficits. This echoes concerns expressed by the Trump administration.

Following the U.S. Supreme Court's rejection of President Donald Trump's extensive emergency tariffs, the administration has utilized Section 122 of the Trade Act of 1974 to impose replacement tariffs aimed at improving the balance of payments. However, according to IMF Western Hemisphere Director Nigel Chalk, the optimal approach to decrease the current account deficit, which the IMF estimates at 3.5% to 4.0% of GDP in the near term, is to cut the U.S. fiscal deficit.

The IMF's initial 'Article IV' review of the Trump administration's policies projects U.S. growth rates at a steady 2.4% for 2026, aligning with earlier forecasts, while inflation may not meet the Federal Reserve's 2% target until early 2027. Despite this, U.S. fiscal deficits are estimated to remain between 7% and 8% of GDP in coming years, far above targets set by U.S. Treasury Secretary Scott Bessent. This contributes to an escalating public debt situation, potentially reaching 140% of GDP by 2031.