The International Monetary Fund warned on Tuesday that an escalation of trade tensions and new import tariffs would deliver “significant negative macroeconomic effects” while doing little to reduce the widening current-account imbalances dividing the global economy. The assessment was set out in the Fund’s annual External Sector Report, which examines the world’s 30 largest economies. According to the report, global current-account surpluses and deficits expanded sharply in 2024 after years of gradual narrowing. The United States’ deficit grew by $228 billion to $1.13 trillion, equal to 1% of global GDP, while China’s surplus increased by $161 billion to $424 billion. The euro area’s surplus rose by $198 billion to $461 billion. The IMF attributed these excesses to domestic policy distortions—such as large U.S. fiscal deficits, weak social safety nets in China and underinvestment in Europe—rather than to trade practices. It urged Washington to rein in public spending, Beijing to boost household consumption and European governments to expand infrastructure investment, stressing that tariffs are ineffective at correcting the underlying imbalances. Beyond the immediate hit to global demand, the Fund said higher tariffs would raise import prices, spur inflationary pressures and risk unsettling the international monetary system by pushing investors toward alternative currencies. It called for coordinated policy remedies and cautioned that further protectionism would inflict lasting damage on global growth.