The International Monetary Fund (IMF) has raised its growth forecast for the UK economy to 1.6% in 2025, slightly above its earlier estimate of 1.5%. However, it also issued a warning regarding the potential negative impact of Donald Trump’s proposed economic policies, including his plan to impose tariffs. These tariffs could exacerbate global trade tensions, hinder investment, and disrupt supply chains.
While Trump’s tax cuts and deregulation may offer short-term economic benefits for the US, the IMF warned that they could eventually backfire. The proposed tariffs, especially those targeting China, Canada, and Mexico, could lead to higher import costs, affecting global markets.
Trump’s economic plans also raise concerns about a possible inflationary boom followed by a potential economic downturn, which could weaken the safety of US Treasury bonds. The IMF forecasted global growth at a lackluster 3.3% for both 2025 and 2026, mainly due to weaker growth in major economies, although the US is expected to fare better than others.
The IMF’s report highlighted that the UK is expected to perform better than several European countries over the next two years, which could be a positive sign for UK Chancellor Rachel Reeves. The IMF also noted that the UK’s economic outlook for 2025 was upgraded, making it the only G7 country, along with the US, to see such an improvement.
Regarding Trump’s return to the White House, the IMF noted that his tariff policies could lead to a boom-bust cycle in the US economy, potentially reducing the global role of US Treasuries. If implemented, Trump’s aggressive tariff plans, combined with deregulation, could create significant global uncertainty and depress economic growth. The IMF cautioned that this could hurt emerging economies and lead to global economic instability.
In response to the IMF’s forecast, Reeves highlighted that the UK was the only G7 country besides the US to have its growth outlook raised, despite ongoing economic challenges. The World Bank also warned that US tariffs could depress global growth, predicting a weak 2.7% global growth rate for 2025.
