The International Monetary Fund (IMF) has upgraded its global growth forecast for 2025, citing a de-escalation in US tariff threats under President Donald Trump. The Washington-based organisation now expects the world economy to expand by 3% this year, up from its April estimate of 2.8%, with the 2026 outlook also revised upward to 3.1%.
The improved forecast follows Trump's decision to scale back some of his most severe tariff proposals, including a planned 30% levy on EU goods, which was reduced to 15% in exchange for EU commitments to purchase US oil and gas worth nearly £600bn. Similar deals were struck with Japan and China, though Beijing retaliated with tariffs on rare earth metals. The IMF noted that the effective US tariff rate has fallen from 24% to about 17%, though it remains historically high.
Britain's growth forecast for 2025 was upgraded by 0.1 percentage points to 1.2%, making it the fastest-growing European economy in the G7, according to Chancellor Rachel Reeves. The IMF also expects the Bank of England to cut interest rates twice this year, to 3.75%, though it warned that rising inflationary pressures could undermine market expectations.
Despite the upgrades, IMF chief economist Pierre-Olivier Gourinchas cautioned that US policies remain 'highly uncertain' and risks to growth are 'firmly on the downside'. He highlighted the need for comprehensive trade agreements by an August 1 deadline set by the White House for countries like Vietnam and South Korea, warning that ongoing uncertainty could weigh on investment.
Gourinchas also stressed the importance of central bank independence, amid Trump's repeated calls for the Federal Reserve to cut interest rates. 'The evidence is overwhelming that independent central banks… are essential to anchoring inflation expectations,' he said. Trade data showed US imports fell by $11.5bn in June, narrowing the trade deficit to $86bn.
