The International Monetary Fund has delivered a sobering assessment of the world economy, sharply cutting its growth forecasts as new US tariff policies threaten to destabilise global trade.
The IMF's latest World Economic Outlook reveals that the organisation now expects global GDP to expand by just 2.8% this year, a significant downgrade from previous projections. This marks the most pessimistic forecast from the fund in over a decade, excluding recession periods.
UK Faces Economic Headwinds
Britain finds itself particularly vulnerable to the unfolding trade tensions, with the IMF reducing its UK growth forecast to a mere 0.7% for 2025. This places the country among the worst-performing advanced economies, highlighting the potential domestic impact of international trade disputes.
The warning comes as former President Donald Trump implements sweeping tariff increases on imports from multiple trading partners, including the European Union and China. These measures have triggered retaliatory actions and raised concerns about a full-blown global trade war.
Global Ripple Effects
IMF economists emphasised that no major economy would emerge unscathed from the escalating trade tensions. "The cumulative effect of these tariff measures could reduce global economic output by approximately 0.7% over the next two years," the report stated.
The analysis identifies several key concerns:
- Disruption to established supply chains
- Increased costs for businesses and consumers
- Reduced business investment confidence
- Potential job losses in export-dependent sectors
Market Uncertainty Grows
Financial markets have reacted nervously to the developments, with sterling experiencing volatility against both the dollar and euro. The uncertainty has also affected UK government bond yields as investors seek safer assets.
Business leaders across Britain have expressed alarm at the potential consequences for the UK's economic recovery. Manufacturing and automotive sectors, which rely heavily on international trade, are considered particularly at risk from the new tariff regime.
The IMF's stark warning serves as a clear signal that policymakers must navigate these choppy economic waters with care, as the decisions made in Washington and other global capitals will have profound implications for growth and stability worldwide.
