The most concerning development for the global economy is the "haphazard" tariffs policy, according to IMF director Kristalina Georgieva.

• The International Monetary Fund managing director, Kristalina Georgieva, stated that a soft landing for the global economy is probable due to upcoming rate cuts, but the medium-term economic outlook remains unenthusiastic.
• At the CNBC CEO Summit in Washington, D.C., on Tuesday, she stated that the global economy could suffer a loss of up to 7% of GDP in the worst-case scenario due to the increase in trade restrictions, led by the U.S., China, and the European Union.
• The IMF head stated that up to two-thirds of the tariffs lack justification, which is concerning given the global economy is already expected to grow at a slower rate of roughly 1% compared to pre-pandemic levels.

According to Kristalina Georgieva, the International Monetary Fund managing director, the world economy is expected to experience a soft landing, inflation is decreasing, and rate cuts are imminent. However, Georgieva warns that the increase in trade restrictions, including tariffs, from major economies poses the greatest threat to global growth.

Georgieva stated during an interview with CNBC "Squawk on the Street" co-anchor Sara Eisen at the CNBC CEO Summit in Washington, D.C., on Tuesday that trade is slowing down even more than it would be slowing down otherwise.

The number of trade restrictions has tripled in the past year, from 1,000 to 3,000, and two-thirds of these tariffs lack justification, according to the IMF managing director. She also expressed concern about the increasing trend of industrial policy being adopted without proper planning or justification.

Georgieva stated that mostly the U.S., China, and the European Union are responsible for half of the industrial policy measures. When analyzing tariffs, she found justification for one-third of them.

The IMF managing director attempted to find a middle ground between supporting stricter trade limitations and advocating for more nuanced tariff policies.

"Georgieva stated that the reemergence of love for tariffs can be accepted because globalization did not benefit everyone."

The Russia-Ukraine war highlighted the significance of supply chain security and the necessity of diversifying supply sources, as observed by her.

Georgieva stated that the aggressive tariff policies of President Biden and Donald Trump are leading to slower growth than the IMF would have predicted, as she has seen how industrial policy can be "favorable" but ultimately disappointing, due to the inability of governments to accurately predict winning companies.

The International Monetary Fund (IMF) has estimated that trade restrictions can have a significant impact on the global economy, ranging from a best-case scenario of 0.2% growth to a worst-case scenario of 7% of GDP. According to IMF calculations, if a country implements a trade restriction, the probability of reciprocity is 75%, which increases Georgieva's concerns about the law of unintended consequences. She emphasized the need for carefully calibrated actions that balance national security and economic security, without sacrificing the overall well-being of the global economy.

The global economy is performing better than expected, with the IMF upgrading its growth outlook to 3.2% and the U.S. leading the way. Over the past two years, global GDP has grown by 6.7%, which is almost a full percentage point higher than the IMF forecast from 2022.

Georgieva stated that her focus is on the disappointing medium-term growth prospects.

The IMF predicts a 3% annual global growth rate, which is 1% lower than before Covid. This slow growth will lead to disappointment among people and financial concerns among families. To avoid this, we need to increase growth and productivity. Otherwise, we risk having people on the streets.

Small open countries urge us to introduce some rationality into our decision-making processes.

In the past 30 years, the world economy has tripled, while emerging markets in developing economies have quadrupled. However, Georgieva warns that pushing costs up will lead to an increase in prices. She also emphasizes that poverty and hunger can have a negative impact on global security.