Despite aggressive trade rhetoric and the persistence of US tariffs, global growth has remained more resilient than many feared, thanks to a powerful mix of technology-led investment and expansionary fiscal policy, according to Gita Gopinath, Economics Professor at Harvard University and former First Deputy Managing Director of the International Monetary Fund.
Speaking to CNBC-TV18 on the sidelines of the World Economic Forum 2026 in Davos, Gopinath said the real economic impact of tariffs has been far more muted than headline numbers suggest, even as policy uncertainty continues to cloud the global outlook.
Actual Tariffs Lower Than Headline Rates
Gopinath urged a distinction between announced tariff rates and what is actually being paid by US importers. While statutory tariff rates often cited in policy debates are in the range of 24–25%, the effective tariff rate in the US economy is closer to 14%, she said, citing research-based estimates.
“That’s part of the reason why tariffs have not been that consequential for the economy,” Gopinath noted.
At current levels, tariffs have added an estimated 0.5–0.7 percentage points to US inflation and acted as a modest drag on growth. “They have been a headwind,” she said, “but broadly in line with what you would have expected at these rates.”
AI Boom and Markets Offset Trade Headwinds
Crucially, those headwinds have been offset by strong tailwinds elsewhere in the global economy. Gopinath pointed to the AI-driven investment cycle, robust equity markets, and the resulting wealth effects on consumption as key buffers against trade-related stress.
The surge in capital spending linked to artificial intelligence has supported productivity expectations and business confidence, while stock market gains have bolstered household balance sheets, particularly in the US.
“These forces have actually benefited the US economy and many other economies,” she said.
Fiscal Policy Turns Expansionary
Adding to the resilience is a shift toward fiscal expansion across major economies. Gopinath highlighted that fiscal policy in the US, China and Germany is set to be expansionary this year, providing additional support to demand at a time when tariffs could otherwise have weighed more heavily on activity.
Taken together, AI investment, buoyant financial markets and fiscal stimulus have helped neutralise the economic drag from tariffs, allowing growth to hold up better than pessimistic forecasts had anticipated.
A Strange and Uncertain Macro Moment
Still, Gopinath cautioned against complacency. While the global economy has absorbed the initial shock from tariffs, she described the current environment as unusually fluid and unpredictable.
“This movie is not over yet,” she said, referring to the evolving nature of US trade policy and broader geopolitical dynamics. Policy signals can shift rapidly, making uncertainty itself a growing risk factor for businesses and governments.
The defining feature of 2026, Gopinath suggested, is not just tariffs, but the constant element of surprise shaping global economic decision-making.
For now, growth has proved resilient. Whether it can remain so will depend on how long the offsets—from AI, markets and fiscal policy—continue to outweigh the drag from trade and geopolitical tensions.
Below is the excerpt of the interview.
Q: Let’s start with what President Trump has done to the global economic order and what this reset could potentially mean for global growth.
Gopinath: Like I say, this movie is not over yet. It’s not going to be over even after his current speech. What comes tomorrow could be very different from what he said today. So he certainly is setting the agenda for the world, for what’s happening in Davos. Everybody is hanging on to every word of what he says on the global economy. So we’ll see. I mean, this is a strange time. I think a lot of people expected that there was going to be geoeconomic fragmentation and that geopolitics was going to play a bigger role. But I don’t think anybody expected that this would happen within the West—that the US and Europe would be against each other. And that’s truly the big news of 2026.
Q: It is clearly the big news of 2026. But let’s talk about the tariffs for a moment. We don’t know which way the Supreme Court will rule, and even if it rules against President Trump, all indications from the administration are that they will, in some form or fashion, bring the tariffs back. The tariffs are here to stay. So far, we haven’t seen an impact, or a significant impact, on growth or inflation. How are you looking at that?
Gopinath: We should always make the distinction between the numbers that get announced, what make the headlines, and the actual tariffs that are being paid by US importers. We did some research on this, and if you look into it, the actual tariff rate in the US is about 14%. The statutory rate is more like 24–25%. So this is a fraction of what that statutory rate is. That’s part of the reason why tariffs have not been that consequential for the economy. If you take a 14% number, then I think the way it’s played out is pretty much what you would have expected. It’s added about 0.5 to 0.7% to US inflation. It has slowed the economy somewhat; it’s been a headwind. But the US economy, and many other economies, have actually benefited from the AI boom, investment in AI, the stock market boom, and the effect that has had on consumption. Also, fiscal stimulus in China, in Germany, and in the US this year is actually going to be expansionary. All of those are offsetting the headwinds from tariffs.
Q: I’ll come to AI in just a second, but I want to talk about rates and, more importantly, what’s happening with the Fed. You’ve also come out in support of central bank independence and in support of Jerome Powell. What does this DOJ investigation into the Fed mean—not here and now, but in the medium to long term? And what does it signal to other central banks and other administrations around the world?
Gopinath: What I worry about is that it’s less about J Powell right now, because he’s got a few more months left and his term is over in May. I don’t think any of these criminal investigations are going to stick or play out. But the action sends a chilling message to everybody else on the rate-setting committee that basically says, if you don’t do what we would like you to do, then you could be subject to serious investigation and the state machinery could be after you. That’s what I’m worried about, which is why I really welcome the very strong pushback that has come not just from central bankers around the world, but also from within the US Senate. Republicans have come out and said that this is really unacceptable. The stronger the pushback is, the better. There is also an important Supreme Court decision that’s going to be made on Lisa Cook. Where that lands will make a difference. This is unheard of—that something like this could happen not just to a central bank, but to the most important central bank in the world.
Q: Speaking of the central bank, a decision on who replaces Jerome Powell is expected perhaps within the week, or close enough. Kevin Warsh—Kevin Hassett —what are you going with?
Gopinath: I think what’s changed in the last couple of days is that maybe it would not be Kevin Hassett, because, frankly, that was a fallout of the whole criminal investigation into Powell and Republicans pushing back and saying, no, we want an independent central bank. That said, I still think Trump probably places all his trust in Hassett. It could still be Hassett, or it could be neither of them. It could be another third person completely. We’re full of surprises every day.
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