Washington, Oct 15 (AP) The US and global economies will grow a bit more this year than previously forecast as the Trump administration's tariffs have so far proved less disruptive than expected, the International Monetary Fund said on Tuesday, though the agency also said the extensive duties still pose risks.

The United States' economy will expand 2 per cent in 2025, the IMF projected in its influential semiannual forecast, the World Economic Outlook. That is slightly higher than the 1.9 per cent forecast in the IMF's last update in July and 1.8 per cent in April. The US should grow 2.1 per cent next year, also just one-tenth of a per cent faster than its previous projection, the IMF said.

Its current forecasts are still down from a year ago, however, a sign that the international lending agency expects the tariffs to weaken the US economy, in part by creating more uncertainty for businesses. Last October, the IMF forecast the US would grow 2.2 per cent this year.

All the projections also represent a slowing from 2024, when the US economy expanded at a faster 2.8 per cent.

The global economy, meanwhile, will grow 3.2 per cent this year, up from a 3 per cent estimate in July, the IMF forecast, and 3.1 per cent in 2026, the same as its previous estimate.

While the US and world economies have fared better than expected, it is too soon to say they are fully in the clear, the IMF said, as President Donald Trump has continued to make tariff threats and it can take time for changes in international trade patterns to play out.

On Friday, for example, Trump threatened to slap 100 per cent duties on all imports from China, which caused a sharp fall in the stock market.

IMF chief economist Pierre-Olivier Gourinchas said at a news conference that the import taxes and ongoing threats to impose more duties have created ongoing uncertainty for many businesses and are weighing on the world economy.

"The tariff shock is here, and it is further dimming already weak growth prospects," he said.

Gourinchas also said that a burst of investment in artificial intelligence, in the form of huge data centres and extensive computing power, has helped offset the drag from trade and boosting the US economy. Yet if a financial market bubble formed and then burst, it could sharply slow business investment and consumer spending, he said.

"There are echoes in the current tech investment surge of the dot-com boom of the late 1990s," he said. "It was the internet then, it is AI now." Shares of two companies active in the AI sector, AMD and Oracle, which announced an expanding partnership on Tuesday, have seen their shares rise 80 per cent this year.

Gains in AI-related stock values have lifted Americans' wealth and fuelled consumer spending, Gourinchas said, just as companies are ramping up their investments in advanced computer chips and building data centres. Hotter spending and investment could push central banks to raise interest rates over time, he said.

Gourinchas also offered several reasons the US and global economies have remained resilient after the widespread imposition of tariffs earlier this year.

"First and foremost, the tariff shock itself is smaller than initially feared, with many trade deals and exemptions," he said. "Most countries also refrained from retaliation, keeping the trading system open. And the private sector also proved agile, front-loading imports and rerouting supply chains." By front-loading imports, many US companies were able to stock up on goods before the duties took effect, enabling them to avoid or delay price increases.

Yet many of those factors only reflect "temporary relief, rather than underlying strength in economic fundamentals", the IMF's report said.

The IMF also said that import price data in the US shows that so far, importers and retailers are paying most of the tariffs, not overseas companies, as many Trump administration officials have predicted. Over time, those firms are likely to pass on more of the price hikes to consumers, the report said.

There are signs that some downsides of the higher tariffs are starting to emerge, the IMF outlook said. Core inflation, which excludes the volatile food and energy categories, has ticked up to 2.9 per cent, according to the Federal Reserve's preferred measure, up from 2.7 per cent a year ago. Hiring has ground to nearly a halt, which could partly reflect a more cautious approach by many firms in the wake of the uncertainty created by the higher tariffs.

The IMF's forecasts are modestly more optimistic than many private-sector economists' expectations. The National Association for Business Economics, a group of academic and business economists, on Monday forecast that the US would grow just 1.8 per cent this year and 1.7 per cent in 2026.

Nearly two-thirds of the economists surveyed by the NABE said they think the administration's duties are nevertheless slowing growth, by up to a half-percentage point.

China, meanwhile, has weathered the hit from US tariffs by sending more of its goods to Europe and Asia, rather than the United States, the IMF said. Its currency has depreciated, which has made its exports cheaper. The IMF is forecasting that China's economy will expand 4.8 per cent this year and 4.2 per cent in 2026, the same as in July.

Gourinchas said that China's economy has grown increasingly dependent on exports, while its real estate sector continues to struggle under heavy debt loads.

"It is increasingly hard to see how this could be sustained," he added.

In Europe, Germany is bolstering growth by increasing government spending to build up its military, Gourinchas said. The IMF now expects the 20 countries that use the euro to grow 1.2 per cent this year, up from a 1 per cent forecast in July, and 1.1 per cent next year, the same as three months ago.

The IMF is a 191-nation lending organisation that works to promote economic growth and financial stability and to reduce global poverty. (AP) RC