IMF warns on Trump’s plans but upgrades UK outlook

The International Monetary fund (IMF) has upgraded its growth projection for the UK economy this year, but has also warned about the feasible impact of Donald Trump’s economic plans.

The global institution upgraded its prediction for UK growth to 1.6% for this year from its previous approximate of 1.5%.

But it said a threatened wave of tariffs by incoming US president Trump could make trade tensions worse, lower property, and disrupt supply chains across the globe.

The IMF also said although tariffs, levy cuts and deregulation could boost the US economy in the short term, they could ultimately backfire.

The prospect of higher taxes being introduced on imports to the US is concerning many globe leaders because they will make it more expensive for companies to sell their goods in the globe’s biggest economy.

Tariffs are a central part of Trump’s economic imagination – he sees them as a way of growing the US economy, protecting jobs and raising levy turnover – and has threatened to issue tariffs against China, Canada and Mexico on day one of his presidency next week.

He has also said he would impose 100% tariffs on the BRICS bloc of nine nations if they were to make a rival funds to the US dollar.

The IMF said such policies could set the scene for an inflationary boom followed by a bust and could weaken US Treasury bonds as a secure bet.

As well as upgrading its outlook for the UK, the IMF suggested the UK economy would perform better than European economies such as Germany, France and Italy over the next two years.

The improved projection could be a boost for Chancellor Rachel Reeves, who has faced pressure over her policy decisions this week, after figures showed the economy had flatlined.

Labour has made growth its key objective, but Reeves has admitted the government has to “do more to develop our economy”, in order to boost living standards.

The latest IMF figures suggested the UK economy had weaker growth last year than the organisation had expected.

Responding to the IMF’s update, Reeves highlighted that the UK was the only G7 economy, apart from the US, to have its growth projection upgraded for 2025.

Forecasts are never perfect given the many factors that affect financial expansion – from geopolitics to the weather. But such reports can point in the correct path, especially where they align with other predictions.

The IMF predicted “stable, albeit lacklustre” global growth of 3.3% in both 2025 and 2026, below a historical average of 3.7%.

Its 2025 projection was largely unchanged from a previous one, mainly because it expects higher US growth than previously predicted to offset lower growth in other major economies.

The imminent arrival of Trump in the White House dominates the section on risks in the IMF’s twice-yearly projection for the globe economy.

When he was last in power, Trump launched into a trade war with China, and US policy led to tit-for-tat tariffs with the EU.

This period round, Trump has proposed a 10% tariff on global imports, a 25% responsibility on imports from Canada and Mexico, and a 60% tariff on Chinese goods.

It warns that an inflationary US boom could be followed by a feasible bust that would potentially “weaken the role of US Treasuries as the global secure property”.

Investors view US Treasury stocks and bonds as one of the safest feasible bets, because the bonds – which are benevolent of like an IOU – are backed by the US government.

In addition, if red tape on business is cut too much, this could navigator to a runaway dollar that could suck money out of emerging economies, depressing global growth.

Trump going ahead with deportations of illegal immigrants could “permanently reduce potential output” and also raise worth rise, The IMF said.

Its chief economist, Pierre-Olivier Gourinchas, said “tremendous uncertainty” about Trump’s upcoming policies was already affecting ownership markets around the globe.

On Thursday, the globe financial institution also warned that US tariffs could hit trade and depress global growth this year.

The financial institution predicts global growth of 2.7% in 2025, which would be the weakest act since 2019, aside from the sharp contraction seen at the height of the Covid pandemic.