Global economy shrugs off US tariff shock, tech spend helped

The global economy has proven remarkably resilient in the face of escalating US tariff measures, with the International Monetary Fund projecting worldwide growth of 3.3 percent for 2026. This resilience stems largely from an unprecedented surge in technology investment, particularly in artificial intelligence, which has helped companies navigate around trade barriers by reshuffling supply chains and export strategies.

The IMF's latest forecast represents a marginal improvement from autumn projections, suggesting the tariff impact has been more of a drag than a derailment. "Remarkably, current projections are broadly unchanged from a year earlier, as the global economy shakes off the immediate impact of the tariff shock," the Fund stated. This stability reflects how businesses have adapted to the new trade environment rather than succumbing to it.

Technology Investment Drives US Outperformance

The key factor behind this global resilience is a massive surge in technology-driven investment, with AI playing a central role. In the United States, IT spending now accounts for a larger share of the economy than at any point since the early 2000s. This shift has enabled Washington to shrug off trade headwinds more effectively than its peers.

The IMF expects US growth to reach 2.4 percent in 2026, comfortably ahead of other advanced economies. This outperformance reflects how the concentration of AI development and deployment in the US has created a buffer against trade disruption. Companies are investing heavily in automation and AI capabilities that reduce dependence on traditional supply chains.

Europe Lags Behind

By contrast, Europe remains stuck in a lower gear. The IMF's 2026 growth projections show Germany at 1.1 percent, France at 1.0 percent, and the UK at 1.3 percent. While technology investment is helping prop up global growth, the benefits are heavily skewed toward the US, leaving Europe with a more modest outlook.

This divergence highlights a structural shift in how growth is generated. The IMF notes that this bout of growth has less to do with consumers spending freely and more to do with money flowing into new technologies. That has softened the hit from tariffs, but it also leaves growth resting on a narrower base, with AI-heavy sectors carrying much of the load.

Patchy Global Picture

Elsewhere, growth patterns vary significantly. China is forecast to grow by 4.5 percent in 2026, while Japan barely reaches 0.7 percent. India remains the standout performer at 6.4 percent growth. Brazil is projected at 1.6 percent, Saudi Arabia and Nigeria around 4.5 percent, and Russia trailing at 0.8 percent.

Risks Concentrated in Tech Sector

The IMF flags significant risks on the other side of this bet. If promised AI productivity gains fail to materialize, or if financing tightens, the same concentration that has supported growth could become a problem. A slowdown in tech investment would not stay contained for long.

"The current tech boom raises important upside and downside risks for the global economy," the IMF warned. "On the upside, AI could start to deliver on its productivity promises, raising US and global activity by 0.3 percent this year, relative to the baseline. On the downside, AI firms could fail to deliver earnings commensurate with their lofty valuations, and investor sentiment could sour."

For now, the IMF thinks the global economy is still moving in the right direction despite trade friction and tariff threats. Growth is being carried less by trade and more by investment, especially in technology. That has kept the numbers ticking over, but it also means the margin for error is thinner than it looks.

Related Trade and Tech Developments

The IMF report comes amid ongoing trade tensions and technology disputes. The US recently punished China's perceived dominance in legacy semiconductor manufacturing with zero percent tariffs, while also freezing a $42 billion trade pact with the UK over a digital tax dispute. Meanwhile, the European Commission has opened an investigation into Meta after WhatsApp kicked rival AI systems off its platform, and Canada has increased its bet on the European Space Agency tenfold with a $376 million investment.

These developments underscore how the intersection of trade policy and technology investment is reshaping the global economic landscape. The IMF's assessment suggests that while technology investment has provided a buffer against trade disruption, the concentration of growth in AI-heavy sectors creates new vulnerabilities that policymakers must monitor closely.