Donald Trump’s tariffs chaos will slash UK economic growth and send inflation jumping, says the International Monetary Fund.
In a double blow to Rachel Reeves, the IMF cut its growth forecast for Britain by 0.5 percentage points to 1.1% for 2025, compared to its January prediction, and hiked expected inflation by 0.7 percentage points to 3.1%.
The US president’s tariff wars will fuel the cost of living for millions of Britons, as well as citizens in countries around the world, according to the new report.
The IMF laid bare the economic carnage that Trump’s tariffs will cause, including in America where the growth forecast was axed by a startling 0.9 percentage points to 1.8% for this year, and where the dollar has shed value.
“The global economic system under which most countries have operated for the last 80 years is being reset, ushering the world into a new era,” said the Washington-based leading economists in the first indepth analysis of the Trump tariffs turmoil.
“Existing rules are challenged while new ones are yet to emerge.”
They added: “Since late January, a flurry of tariff announcements by the United States, which started with Canada, China, Mexico and critical sectors, culminated with near universal levies on April 2.
“The US effective tariff rate surged past levels reached during the Great Depression while counter-responses from major trading partners signicantly pushed up the global rate.”
IMF Economic Counsellor Pierre-Olivier Gourinchas added: “We expect that the sharp increase on April 2 in both tariffs and uncertainty will lead to a significant slowdown in global growth in the near term.”
Amid the economic mayhem, which includes Trump’s U-turn to pause higher tariffs for 90 days, the IMF cut its global growth forecast to 2.8% and 3% for this year and next, a cumulative downgrade of about 0.8 percentage point relative to its January predictions.
Without tariffs, it believes global growth would have seen “only a modest cumulative downgrade” of 0.2 percentage points.
The IMF added: “For the United Kingdom, the growth projection for 2025 is 1.1 percent, lower by 0.5 percentage point compared to the forecast in January.
“This reflects a smaller carryover from 2024, the impact of recent tariff announcements, an increase in gilt yields, and weaker private consumption amid higher inflation as a result of regulated prices and energy costs.”
Responding to the report, Chancellor Ms Reeves said: “This forecast shows that the UK is still the fastest growing European G7 country.
“The report also clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade.”
But the lower growth forecasts will hit her Budget plans, and fuel fears of tax rises in the autumn.
Shadow chancellor Mel Stride said: “At a time when families are looking for stability and support, Labour’s policies are stifling growth, pushing up the cost of living and leaving us vulnerable to external shocks."
Germany will see no growth in 2025, according to the IMF, France 0.6 per cent, Italy 0.4 per cent, Japan 0.6 per cent and Canada 1.4%.
Sir Keir Starmer, who is seeking a US-UK trade deal to limit the impact of tariffs, has vowed to make the UK the fastest growing country in the G7 which includes the US, UK, France, Germany, Japan, Italy and Canada.
