The International Monetary Fund warned Wednesday that the public debt situation worldwide could be more dire than most think, highlighting skyrocketing fiscal deficits in the U.S. and China.

Global public debt will rise above $100 trillion by the end of 2024, the agency projected in its annual fiscal monitor report. By the end of the decade, the IMF forecasts global public debt will reach 100% of world GDP. 

The U.S. and China account for a significant share of rising public debt levels. If the two countries were excluded from calculations, the global public debt to GDP ratio would fall around 20%, the IMF said. 

“Public debt may be worse than it looks,” IMF director of fiscal affairs Vitor Gaspar said, adding that governments’ debt calculations suffer from an optimism bias and are prone to underestimation. 

Governments are facing a “fiscal policy trilemma,” caught between needing to spend more to ensure security and growth, while facing resistance toward higher taxation while public debt levels become less sustainable, per the report. Poor countries in sub-Saharan Africa are most under pressure between the need to spend to alleviate poverty while struggling with lower tax capabilities and worse finance conditions. 

Unsustainable debt levels place countries’ markets at risk of a sudden sell-off if investors view a country’s fiscal health as too poor. This uncertainty, even across advanced economies with higher debt tolerance such as the U.S. and China, can lead to a spillover effect of higher borrowing costs to other economies.

The Treasury Department announced earlier in October that the U.S.’s  budget deficit has risen to $1.833 trillion, the highest level outside of the pandemic era. In recent years, the U.S. has approached several government shutdowns as government funding bills become more contentious between politicians amid growing concerns of the country’s fiscal health.

Extreme tariffs proposed by U.S. presidential candidate Donald Trump would interrupt the path of disinflation and could lead to higher interest rates, according to the head of the Institute of International Finance.

“The assumption is you’ll have higher inflation, higher interest rates than you would have in the absence of those tariffs,” Tim Adams, president and CEO of the IIF financial services industry trade group, told CNBC’s Karen Tso on Tuesday.

“You can argue, is it one off, or is it over time? It really depends on what retaliation looks like, and is it iterative over time. But no doubt it would be a break on the progress we’re making bringing down prices,” Adams said.

Trump has made universal tariffs a core part of his economic pitch to voters, with suggestions of a 20% tariff on all goods from all countries and a higher 60% rate on Chinese imports. He has also pledged to put a 100% tariff on every car coming across the Mexican border, and to slap any country which acts to “leave the U.S. dollar” with a 100% tariff.

In defense of the plan, Trump told Bloomberg Editor in Chief John Micklethwait in an interview earlier this month: “The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States, so it doesn’t have to pay the tariff.”

Trump has previously described universal tariffs as drawing a “ring around the country,” and denied they would be inflationary.

However, analysts have warned that the overall package proposed by Trump, including higher tariffs and curbs on immigration, would place upward pressure on inflation, even if some of the impact could be absorbed in the near-term.

U.S. inflation came in at 2.4% in September, down from a peak of 9% in June 2022 as the world grappled with the impacts of pandemic supply chain disruption and vast fiscal stimulus. The Federal Reserve kicked off interest rate cuts in September with an aggressive half percentage point reduction, despite concerns about the onward path of disinflation.

The potential return of a Trump U.S. presidency comes at a time of increasing trade fragmentation around the world. The European Union earlier this month voted to place higher tariffs on China-made battery electric vehicles, alleging carmakers there benefit “heavily from unfair subsidies.”

The IIF’s Adams told CNBC that both Trump and his Democrat opponent Kamala Harris were running as “change candidates” rather than pledging continuity.

“The concern about Trump is that he’s anti-internationalist, doesn’t care about transatlantic relations, and will be more focused on isolationism and protectionism. Some of them may be a little overdone, but there’s certainly elements of that,” Adams said.

“There’s no doubt that Vice President Harris will be much more engaged with the global community, much more interested in international organizations.”

CNBC has contacted the Trump campaign for comment.

— CNBC’s Rebecca Picciotto contributed to this story.