Pierre-Olivier Gourinchas on the Story Behind the Number

**Bruce Edwards** (0:02)
So, welcome to another episode of the IMF Podcasts. This is also a video podcast which you can watch on the IMF YouTube channel and Spotify because Spotify supports video. But this is the audio version for those of you who still listen on the audio platforms. Today we have the great pleasure of sitting down with outgoing IMF chief economist Pierre-Olivier Gourinchas, who has been in the role since 2022 and is now heading back to UFC Berkeley to continue his invaluable research with this IMF experience in his back pocket.
So Pierre-Olivier, welcome back to the podcast.

**Pierre-Olivier Gourinchas** (0:43)
Thank you for having me, Bruce.

**Bruce Edwards** (0:44)
And I know this is going to be your last experience as chief economist, but I'm hoping that you might consider coming back sometime soon as Professor Gourinchas.

**Pierre-Olivier Gourinchas** (0:55)
I'd be happy to.

**Bruce Edwards** (0:57)
So I'd like to just sort of dive in here with a question about tariffs, which many economists thought that or predicted that would upend the global economy.
And it seems that that really hasn't happened, at least to the extent that many thought it would. Do you think we overreacted perhaps to the prospect of tariffs?

**Pierre-Olivier Gourinchas** (1:22)
I wouldn't say that we overreacted. I mean, we, at The Fund, I think we were in a good place when I look back. We were sort of at the milder end of the downgrades that everyone was doing in 2025, in April of 2025, after the announcement of the set of unilateral tariffs imposed by the US on pretty much every country out there.
And then the rest of the year, even compared to our own reference forecast as of April 2025, we've been revising up throughout 2025 But there were a number of reasons for that. Things changed. Among the things that changed, I think that the most important one is the tariffs themselves were significantly scaled back down, compared to what was announced initially on April 2nd in the Rose Garden. And so, of course, if you have a smaller tariff shock, then you're not going to have as big of a shock to the global economy. And that has played out. There were a number of deals that were signed. There were a number of pauses, exemptions, et cetera. And so, instead of being at 25%, we ended up closer to 9%, 10%.
The second thing is, and perhaps we had factored this in, but not enough. So there, I would maybe go back and look at the way we did our assessment, is the incredible amount of resilience by businesses in the private sector, global supply chains adapted very, very quickly, maybe faster than we thought they could. And some of it in anticipation also. So there was a big trade boom ahead of April 2nd. A lot of countries, a lot of businesses were anticipating that tariffs might be coming. And after all, it was kind of telegraphed since the election campaign and since the election of President Trump. So a lot of prepositioning of inventories, moving things around. So there was a big boom in trade in the early part of 2025
And then the other thing is, there were a number of tailwinds that were stronger than we could have predicted back in April, one of which was the incredibly accommodating financial conditions. So that helped support the global economy. There was an investment, AI tech boom, I'm sure we'll talk about some of that, that also provided a lot of lift to countries like the US, et cetera. So you put all of these things together. And I would say that our assessment was right in terms of the direction of travel. This was a negative shock. It increased inflation. It was mostly borne out by US consumers and businesses. It slowed down mildly output, but not in an extremely noticeable way because there were these tailwinds. And by early 2026, I think this was largely in the rear-view mirror.

**Bruce Edwards** (4:06)
Do you think that there are still things sort of bubbling beneath the surface that we need to worry about?

**Pierre-Olivier Gourinchas** (4:11)
Well, one of these would be if we have a re-escalation of tariff between countries. But the landscape has changed. The Supreme Court ruling in the United States, with restricting heavily the use of IEPA as a basis for imposing tariffs, means that now if the US wants to put tariffs on industries or countries, it has to do an investigation in Section 301 And they're in the process of doing that. That doesn't mean that we cannot have an escalation of tariffs. But it's not going to be as widespread. It's not going to be as dramatic as what we saw in April 2025 So I think the expectation is the tariffs are not going away. They're going to be replaced over time in a way that will continue to generate actually a fairly significant amount of money for the US. Treasury.