IMF Insights: Global Economy Shakes Off Tariff Shock Amid Tech-Driven Boom

By: Peter Ort, The Quinnipiac University Economics Research Team

 Photo by: Albert Stoynov on Unsplash

On January 19, 2026, a new IMF blog titled Global Economy Shakes Off Tariff Shock Amid Tech-Driven Boom highlights the resilience of global markets to US trade disruptions. However, some risks are taken in order to keep the global economy stable now rather than later, and could potentially cost a much more than a trade disruption if certain circumstances occur.

            For starters, there are many factors that contribute to this surprising amount of global economic stability, such as reduced trade tensions, appropriate fiscal policy, and a fast-acting private sector. Many governments have opted for reducing taxes and increasing government spending to along with a heavy investment into IT (information technology) from the private sector, the most since 2001. As a result, aggregate demand is increased to combat the potential supply side shock of US tariffs.

            Much of the investment into IT is due to the rise of AI, where this mass investment from the private sector is showing shades of the dot-com era. However, despite the over valuation of AI stocks not being nearly as bad as dot-com stocks, it’s worth mentioning that many major AI firms are not listed on the stock market to begin with. Ultimately, it can be harder to gauge the consequences debt borrowings from those firms rather than those being publicly traded.

            The best case scenario for AI (if it’s as productive as said to be) is that it will raise both US and global GDP by 0.3 percent this year, while worst case scenario has tech heavy regions like the US and Asia losing significant global output.

            To ensure limited damage from such a risk, the IMF suggests monetary policy as the primary outlet to solve quell problems. Of course, proper fiscal policy is essential to reduce debt, but monetary policy can alter interest rates and inflation in times of economic downturn. Ensuring Central Bank Independence is key to allowing adequate and sound monetary policy.

            Despite worthy efforts from the market to avoid consequences of recent trade disruption, it should be said that this is masking what is truly at stake for the global economy, which is currently the boom or bust of AI.

For more information, you can read “Global Economy Shakes Off Tariff Shock Amid Tech-Driven Boom”