The International Monetary Fund (IMF) has issued a stark warning that escalating geopolitical tensions and a potential resurgence of Donald Trump's tariff wars pose a severe threat to global economic stability and growth, with direct implications for the United Kingdom.
Mounting Risks to Global Economic Forecasts
In an update to its World Economic Outlook, the Washington-based fund highlighted that a renewed eruption in trade conflicts is among the most significant dangers facing the world economy in 2026. This warning comes as former US President Trump threatens to impose tariffs on eight European nations and NATO allies, including the UK, which have opposed his ambitions regarding Greenland.
The IMF cautioned that a breakdown in relations between the world's major powers could have damaging consequences, stating it could blow its economic forecasts off course. The fund specifically warned that such tensions would "prolong uncertainty and weigh more heavily on activity". Furthermore, geopolitical flare-ups risk "introducing new layers of uncertainty and disrupting the global economy through their impact on financial markets, supply chains, and commodity prices".
Resilient Growth Faces Headwinds
Despite these looming threats, the IMF's current projections show a picture of resilience, largely powered by technological investment. Global growth is estimated to have reached 3.3% in 2025, a rate sustained by a surge in investment in artificial intelligence and other technologies in the US and Europe, which offset headwinds from earlier trade tensions.
Looking ahead, the fund projects global growth to hold steady at 3.3% in 2026, dipping slightly to 3.2% in 2027. It issued a sharp upgrade for US growth in 2026, revising its forecast up to 2.4% from an earlier prediction of 2.1%.
The UK's Economic Position
For the United Kingdom, the IMF's outlook is more modest but stable. It left its forecasts unchanged for 2026 and 2027, predicting growth of 1.3% this year and 1.5% the following year. However, it did issue a modest upgrade for its 2025 estimate, increasing it by one percentage point to 1.4%.
The fund noted that technology-related investment has also contributed to economic activity in the UK and Spain, though not on the same scale as in the United States. Despite its slower growth rate, the UK's projection for 2027 places it behind only the US and Canada among its G7 counterparts.
The warning arrives as world leaders prepare to gather in Davos for the World Economic Forum, seen as a critical juncture for salvaging international cooperation. The affected European nations, including the UK, have already responded to Trump's tariff threats, with a joint statement on Sunday declaring that such actions "undermine transatlantic relations and risk a dangerous downward spiral".
