The UK’s growth forecast has been slashed by a third as the International Monetary Fund (IMF) said the British economy will take a massive hit from Donald Trump’s tariffs.
Countries around the world will see their growth fall this year following the US President’s unilateral imposition of import taxes at the start of this month, according to the organisation.
But it said the UK will be among those that will take the hardest battering from the reshaping of the global economy.
The ‘exceptional circumstances’ caused by the tariffs led the IMF to make dramatic changes to its World Economic Outlook report, with its global growth forecast slashed by 0.5%.
In January, the organisation said the UK economy was predicted to grow by 1.6% – but that has now fallen to 1.1%.
Growth in the UK is still forecast to be higher than Germany, France and Italy, with the German economy predicted to flatline.
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The announcement from the IMF is another headache for Chancellor Rachel Reeves, who has already had to grapple with the impacts of low growth since last year’s election.
It comes just a few weeks before the government’s spending review is published after months of work, with an expectation it will involve significant cuts.
The IMF also predicted inflation in the UK will be 3.1% this year – the highest figure in the G7, which incorporates Germany, France, Italy, Japan, Canada, and the US.
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Donald Trump announced at his ‘Liberation Day’ event on April 2 that enormous tariffs would be placed on products imported to the US from the countries which have the largest trade deficits with it.
A baseline tariff of 10% would be applied to imports from every other country, including the UK, he announced.
Following concerning signs from the US stock market, Trump reversed course and reduced tariffs to the baseline for all countries except China – instead ramping up a trade war with Beijing.
Pierre-Olivier Gourinchas, the IMF’s top economist, said: ‘While many of the scheduled tariff increases are on hold for now, the combination of measures and countermeasures has hiked US and global tariff rates to centennial highs.
‘For this reason, we expect that the sharp increase on April 2 in both tariffs and uncertainty will lead to a significant slowdown in global growth in the near term.’
Growth across the planet was 3.3% last year, and the IMF predicted it would drop to 3% this year – 0.5% lower than its forecast in January.
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