Trade is no longer driving global economic growth to the same extent as in the past and policy changes from the new US administration are triggering responses from other nations, according to International Monetary Fund Managing Director Kristalina Georgieva.

Many nations are facing weaker growth prospects and are saddled with high debt while supply chains have come under pressure due to the COVID-19 pandemic and geopolitical developments, Georgieva said remotely from the US at an IMF event in Tokyo. 

“We also know trade is no longer the engine of global growth it used to be,” she said. “The new US administration is rapidly reshaping its policies on trade, taxation, public spending, deregulation and digital assets, and other governments are also recalibrating their approaches and adjusting their policies.”

Her remarks come as the global economy braces for the fallout from US President Donald Trump’s tariff campaign and retaliatory measures from targeted nations. This week, the president slapped tariffs on Mexico and Canada, with indirect implications for other nations in Asia.

Georgieva urged Asian nations to adjust to the changing norms by embracing the shift toward service-led growth, enhancing digitalization and artificial intelligence and promoting greater regional integration.

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“On the surface, it may look as if the world is retreating from integration, but regionally, countries are leaning in,” she said. “Today, more than half of Asian trade is regional. The trend is the same for foreign direct investments.”