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| IMF warns of ‘major negative shock’ from Trump’s tariffs | IMF warns of ‘major negative shock’ from Trump’s tariffs |
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| Lender cuts forecasts for every major economy, with UK expected to grow by 1.1% this year, down from 1.6% | Lender cuts forecasts for every major economy, with UK expected to grow by 1.1% this year, down from 1.6% |
| Donald Trump’s tariffs have unleashed a “major negative shock” into the world economy, the International Monetary Fund has said, as it cut its forecasts for US, UK and global growth. | Donald Trump’s tariffs have unleashed a “major negative shock” into the world economy, the International Monetary Fund has said, as it cut its forecasts for US, UK and global growth. |
| In a stark assessment of the impact of the US president’s policies, as global finance ministers prepare to meet in Washington, the IMF said: “We expect that the sharp increase on 2 April in both tariffs and uncertainty will lead to a significant slowdown in global growth in the near term.” | |
| Publishing the latest edition of its World Economic Outlook, the Washington-based lender cut its forecast for global GDP growth to 2.8% for this year – 0.5% weaker than it was expecting as recently as January. | Publishing the latest edition of its World Economic Outlook, the Washington-based lender cut its forecast for global GDP growth to 2.8% for this year – 0.5% weaker than it was expecting as recently as January. |
| The IMF said that while its forecasts had been prepared on the basis of current trade policy, “intensifying downside risks dominate the outlook”. | The IMF said that while its forecasts had been prepared on the basis of current trade policy, “intensifying downside risks dominate the outlook”. |
| Its forecasts show every major economy being hit, with the UK expected to grow by 1.1% this year, down from 1.6% predicted in January. The IMF expects a sharper deterioration for the US, from 2.7% to 1.8%. | Its forecasts show every major economy being hit, with the UK expected to grow by 1.1% this year, down from 1.6% predicted in January. The IMF expects a sharper deterioration for the US, from 2.7% to 1.8%. |
| Responding to the UK downgrade the chancellor, Rachel Reeves, highlighted the fact that the IMF still expected it to be the “fastest-growing European G7 economy” in 2025. | Responding to the UK downgrade the chancellor, Rachel Reeves, highlighted the fact that the IMF still expected it to be the “fastest-growing European G7 economy” in 2025. |
| But she added: “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 she added: “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.” |
| Reeves will meet her US counterpart, Scott Bessent, for the first time on the sidelines of the meeting and is expected to press the UK’s case for reduced tariffs. | Reeves will meet her US counterpart, Scott Bessent, for the first time on the sidelines of the meeting and is expected to press the UK’s case for reduced tariffs. |
| As its spring meetings kick off, the IMF said that even after Trump’s “pause”, which suspended punitive “reciprocal tariffs” on a string of countries, trade barriers were at the highest level in a century. | As its spring meetings kick off, the IMF said that even after Trump’s “pause”, which suspended punitive “reciprocal tariffs” on a string of countries, trade barriers were at the highest level in a century. |
| Given the lack of clarity about the future direction of the policy, it predicted that companies throughout the global economy were likely to respond by cutting spending. | Given the lack of clarity about the future direction of the policy, it predicted that companies throughout the global economy were likely to respond by cutting spending. |
| “Faced with increased uncertainty about access to markets – their own but also those of their suppliers and customers – many firms’ initial reaction will be to pause, reduce investment, and cut purchases. Likewise, financial institutions will re-evaluate their credit supply to businesses,” it said. | “Faced with increased uncertainty about access to markets – their own but also those of their suppliers and customers – many firms’ initial reaction will be to pause, reduce investment, and cut purchases. Likewise, financial institutions will re-evaluate their credit supply to businesses,” it said. |
| “The combined increased uncertainty and resulting tightening of financial conditions are a global negative demand shock and will weigh on activity.” | “The combined increased uncertainty and resulting tightening of financial conditions are a global negative demand shock and will weigh on activity.” |
| The IMF added that emerging economies may be hit especially hard, as “unfavourable global financial conditions” make it harder for them to service their debts – a situation that could be exacerbated by overseas aid cuts. | The IMF added that emerging economies may be hit especially hard, as “unfavourable global financial conditions” make it harder for them to service their debts – a situation that could be exacerbated by overseas aid cuts. |
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| The UK recently announced a historic cut to its aid budget, to fund defence spending, and Trump is battling court action as he attempts to dismantle USAID. | The UK recently announced a historic cut to its aid budget, to fund defence spending, and Trump is battling court action as he attempts to dismantle USAID. |
| “More limited international development assistance may increase the pressure on low-income countries, pushing them deeper into debt or necessitating significant fiscal adjustments, with immediate consequences for growth and living standards,” the IMF said. | “More limited international development assistance may increase the pressure on low-income countries, pushing them deeper into debt or necessitating significant fiscal adjustments, with immediate consequences for growth and living standards,” the IMF said. |
| As finance ministers prepare to meet, the IMF called for coordinated action to reduce trade tensions, restructure low-income countries’ debts, and “address shared challenges”. It is unclear what role the US could take in any such discussion, however, given its commitment to an “America first” approach. | As finance ministers prepare to meet, the IMF called for coordinated action to reduce trade tensions, restructure low-income countries’ debts, and “address shared challenges”. It is unclear what role the US could take in any such discussion, however, given its commitment to an “America first” approach. |
| With stock markets on Wall Street resuming their slide on Monday, the IMF expressed concern in the report about the shock waves unleashed in financial markets by Trump’s trade policies – and said worse may be to come. | With stock markets on Wall Street resuming their slide on Monday, the IMF expressed concern in the report about the shock waves unleashed in financial markets by Trump’s trade policies – and said worse may be to come. |
| In particular, it points to the risk of “strong volatility” in currency markets, which “may be difficult to navigate, especially for emerging market economies”. | In particular, it points to the risk of “strong volatility” in currency markets, which “may be difficult to navigate, especially for emerging market economies”. |
| The dollar has hit a three-year low, as Trump issued further criticism of Jay Powell, the chair of the Federal Reserve, calling him “Mr Too Late” for failing to cut interest rates. | The dollar has hit a three-year low, as Trump issued further criticism of Jay Powell, the chair of the Federal Reserve, calling him “Mr Too Late” for failing to cut interest rates. |
| The IMF said the probability of a recession in the US had increased to nearly 40%, higher than its forecast of 25% made in October, the month before Trump’s election victory. |