A severe crackdown on immigration in the United States poses a significant threat to both American and global economic prospects, the International Monetary Fund (IMF) has declared in its latest outlook. The fund projects that restrictive immigration policies could reduce US GDP by a substantial 0.3% to 0.7%, sending ripples across the world economy.
This warning was a key component of a report that, while upgrading this year’s global growth forecast to 3.2%, described the overall outlook as “dim.” The IMF is concerned that labor shortages resulting from immigration controls will not only stifle growth but also trigger sharp inflationary spikes in specific US sectors like construction, hospitality, personal services, and agriculture.
The report notes that the global economy has shown “unexpected resilience” so far, largely because the impact of trade tariffs has been muted by consumers and businesses buying goods in advance. However, the IMF stresses that this resilience is likely temporary and masks deeper vulnerabilities that are now beginning to surface.
Beyond the specific threat of US immigration policy, the fund also expressed concern about “stretched valuations” in financial markets. A sudden loss of confidence, particularly in the hyped-up AI sector, could lead to a market downturn and a sharp contraction in business investment, which has been a recent pillar of economic strength.
While the UK received a minor growth upgrade, it was also warned about having the highest inflation in the G7 next year. The IMF’s comprehensive analysis suggests that politically-driven policy shifts on immigration and trade are creating formidable headwinds for a global economy that is already navigating a complex and uncertain path.