The U.S. economy remains the envy of the world in many respects, at least in President Donald Trump\u2019s telling. But its lofty position is threatened by, among other things, America\u2019s own chronic inability to keep a balanced budget, and the administration\u2019s trade policy is part of what\u2019s holding it back from doing so.<\/p>\n
In his State of the Union address<\/a> this week, Trump said the U.S. was \u201cwinning again, and in fact, we\u2019re winning so much that we really don\u2019t know what to do about it.\u201d Despite suffering from low approval ratings<\/a>, Trump might soon score points for the economy, courtesy of the International Monetary Fund, which this week highlighted how the U.S. remains in many ways an economic powerhouse.\u00a0<\/p>\n Strong economic growth, rising productivity, and a labor market that has proved adaptable and resilient combine to paint a rosy picture of the U.S. economy, according to Kristalina Georgieva, the IMF\u2019s managing director.<\/p>\n \u201cWe expect that a buoyant U.S. economy will continue to grow strongly throughout this and next year,\u201d Georgieva said<\/a> on Wednesday, shortly after her agency had released its annual review and outlook<\/a> for the U.S. economy.<\/p>\n Georgieva lauded the \u201cremarkable performance\u201d of the U.S. private sector over the past year. GDP growth reached 2.2%<\/a> in 2025, and the IMF projects it to accelerate to 2.4% for this year. This resilience has turned the U.S. into a primary economic driver for the world that is creating \u201cpositive spillovers to the global economy\u201d at a time of high international uncertainty, she added.\u00a0<\/p>\n A strong economy could be the country\u2019s best chance to patch up its growing deficit<\/a>, Georgieva said. But at least according to the IMF\u2019s recommendations, Trump\u2019s love for punitive tariffs as a main driving force in his trade policy might be actively working against reaching a balanced budget.<\/p>\n The deteriorating state of the country\u2019s fiscal balance threatens to extinguish the benefits of America\u2019s strong economy. Under current policies, general government debt\u2014the measure of how much more the country is spending than taking in\u2014could hit 140% of GDP in the next five years, according to the IMF, possibly more than $50 trillion. The agency noted a troubling paradox in recent policy shifts. While tax and spending changes legislated mostly through the Trump administration\u2019s One Big Beautiful Bill Act last year are expected to modestly boost economic activity this year and next, they\u2019ll be overshadowed by increased spending and lower tax revenue that continue to push federal debt higher.<\/p>\n Trump has framed his tariffs as a key measure to bring in more revenue and reduce the deficit, but Georgieva implicitly pushed back against that narrative. She called U.S. tariffs a \u201cheadwind to even stronger growth\u201d that dragged down productivity. In the story of a strong U.S. economy, \u201cwe could have seen more of the good news\u201d without the penalizing effect of tariffs, she said.<\/p>\n Other groups hold a more discerning view of the nation\u2019s economic prosperity. The nonpartisan Committee for a Responsible Federal Budget, which has frequently sparred<\/a> with Trump and his officials over the debt trajectory, likened the GDP bump to an \u201ceconomic sugar high<\/a>.\u201d A short-term stimulus boost would quickly be followed by a widening deficit and higher interest payments, the CRFB said, warning this burden would override the government\u2019s ability to allocate spending elsewhere.<\/p>\n Right now, \u201cthe U.S. is in a position to fund its spending,\u201d Georgieva said. \u201cThis is also good for the world as a whole because a U.S. that grows, has high productivity, grows rapidly, and has the ability to create more opportunities for others, has a positive spillover effect for the rest of the world.<\/p>\n \u201cThis being said, please be careful. Look at the deficit and debt levels. Bring them down,\u201d she added.<\/p>\n For the U.S. to maintain its prosperity without digging itself into an even deeper fiscal hole, the IMF expressed support for Treasury Secretary Scott Bessent\u2019s long-stated goal of lowering the federal deficit to 3% of GDP<\/a>, a target shared by the CRFB<\/a> and several private sector figures including billionaire investor Ray Dalio<\/a>.\u00a0<\/p>\n But getting there won\u2019t be easy. The IMF calculated the deficit to be 5.9% of GDP last year, and argued that lowering it to that target would require significant spending cuts and increases in government revenues. Much of the IMF\u2019s policy prescription went against the Trump administration\u2019s stated agenda of sweeping tariffs and reduced immigration flows. The agency recommended replacing tariffs with a destination-based consumption tax similar to VAT\u2014a type of tax borne by consumers that tends to have a neutral impact on trade; a significant restructuring of expensive programs including Medicare and Social Security; and implementing a skills-based immigration system to keep the labor market competitive.<\/p>\n As difficult as those changes might be, for this administration or any other, chipping away at the deficit will only become more difficult as time goes on, Georgieva said, adding that the ideal moment would be now, while the economy is still humming along relatively strongly.<\/p>\n \u201cThe U.S. economy continues to deliver an impressive performance,\u201d she said. \u201cThis good news provides an important opportunity for the administration to address the long-standing fiscal imbalance.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The U.S. economy remains the envy of the world in many respects, at least in President Donald Trump\u2019s…\n","protected":false},"author":2,"featured_media":319535,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[16935,72,1322,969,18478,113,63306,61,2535,60,7702],"class_list":{"0":"post-319534","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-budget-deficit","9":"tag-business","10":"tag-debt","11":"tag-donald-trump","12":"tag-economic-growth","13":"tag-economy","14":"tag-fiscal-policy","15":"tag-ie","16":"tag-imf","17":"tag-ireland","18":"tag-u-s-economy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/319534","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=319534"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/319534\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/319535"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=319534"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=319534"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=319534"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}