With Trump’s latest tariff tantrum and rising fears of an AI bubble, Kristalina Georgieva’s warning that ‘uncertainty is the new normal’ already rings true.
Just over 48 hours passed last week between Kristalina Georgieva’s warning about “uncertainty” and Donald Trump’s new China tariffs.
Her comments came at a tense moment for global markets. Investors were trying to balance cautious optimism with growing anxiety. Policy volatility, trade disputes, and overheated tech valuations added to the pressure.
Georgieva also pointed to growing strains in the market. Gold hit a record $4,000 an ounce on Wednesday 8 October, indicating investor anxiety. US stock valuations were also unusually high.
“Before anyone heaves a big sigh of relief, please hear this: global resilience has not yet been fully tested. And there are worrying signs the test may come,” she told an audience at the Milken Institute in Washington.
Georgieva suggested the full economic impact of US tariffs “is yet to unfold”, after many firms front- loaded exports earlier this year to avoid the levies. “Buckle up: uncertainty is the new normal and it is here to stay,” she warned.
IMF and World Bank meetings in Washington
This week, from 13–18 October, the world’s finance ministers and central bankers are meeting in Washington. They are gathering for the IMF and World Bank annual meetings.
In her opening speech for the gathering, Georgieva said the global economy has been more resilient than many feared. Back in the spring meetings, policymakers were fixated on the chaos in the White House.
Why resilience has persisted
Part of this resilience came from “front loading.” Trump’s tariff plans were widely expected. Many companies built up inventories early and began adjusting their supply chains.
Another reason is the response of US trading partners. They often used a mix of charm and concessions toward Trump. They preferred this approach rather than risking a full-blown trade war.
At the same time, firms and governments have been making more trade connections outside the US, creating what Adam Posen, the director of the Washington-based Peterson Institute for International Economics, calls a “new economic geography”.
This shift shows a growing determination among nations to become less reliant on the US and build stronger regional networks, particularly across Asia and parts of Africa.
Global trade remains strong
Last week, there was evidence of strong global trade in the latest update from the UN’s trade and development arm, UNCTAD.
“Trade growth remained positive in the first half of 2025, despite rising trade policy uncertainty, persistent geopolitical tensions and a challenging global economic environment,” Unctad reported.
In the first half of the year, global trade expanded by more than $500 billion and is expected to keep rising, with a lot of the growth coming from developing countries.
Highlighting further shifts in the global economy, UNCTAD noted the ongoing trend of “friendshoring” – a term coined by former Federal Reserve governor Janet Yellen to describe trading with trusted geopolitical allies.
Impact of tariffs and market resilience
The impact of tariffs on the US economy seems smaller than first feared, though with policy changing so often, the full effects may not have reached American consumers yet.
The chaos on Friday was a reminder of Georgieva’s warning that there are still reasons to be fearful: “Global resilience has not yet been fully tested. And there are worrying signs the test may come.”
As the new conflict with China shows, Trump is continuing to use tariffs as a weapon, which is causing new shocks in financial markets. Developing countries have been hit hardest, with some paying the highest tariffs, according to UNCTAD.
Beyond trade policy, the White House continues to push unfunded tax cuts and attack core economic institutions like the Federal Reserve.
Over time, this could weaken market confidence, including trust in US Treasuries (government bonds) – a key benchmark for global assets. So far, there is little sign of that, but once economic credibility is lost, it is hard to regain.
The AI boom
Markets have so far been supported by another unpredictable phenomenon: the AI boom.
Massive investments continue to pour into the tech industry. Investors are betting on generative AI. They are also racing to build the huge data centres needed to train and run the models.
According to data from the World Trade Organization last week, AI-related goods – including semiconductors, servers, and telecommunications equipment – accounted for 20% of global goods trade growth in the first half of 2025, largely flowing from Asia to the US.
Ben May of Oxford Economics said the surge in US capital spending on AI has masked weakness in other parts of the domestic economy.
Concerns over an AI bubble
A growing number of observers are concerned about generative AI. They fear it may not deliver the big gains needed to justify current Wall Street valuations of tech companies.
The increasingly complex web of cross-shareholdings among key tech firms has drawn concern.
The Bank of England last week warned that global markets could face a “sudden correction” if the AI boom reverses.
It said: “On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence. This … leaves equity markets particularly exposed should expectations around the impact of AI become less optimistic.”
Georgieva shared that concern, comparing the AI boom to the dotcom bubble at the turn of the millennium. “Today’s valuations are heading toward levels we saw during the bullishness about the internet 25 years ago,” she cautioned, warning about a possible “sharp correction”.
Still, some analysts warn that this AI-driven momentum may be hiding deeper structural weaknesses in productivity and global demand, making markets more fragile than they seem.
The stakes for the global economy
The dollar and dollar-denominated assets remain central to global finance. This is true despite post-crisis efforts to strengthen other currencies. If an AI crash occurs, it would have worldwide effects.
. It’s perhaps fitting that Trump has launched a new round of destabilising threats just as policymakers arrive to assess the global economy. It certainly drove home Georgieva’s central message to “buckle up.”
Disclaimer: This material is for general informational and educational purposes only and should not be considered investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked in this communication.
