The International Monetary Fund (IMF) has issued a stark warning that former President Donald Trump’s tariffs are delivering a “major negative shock” to the global economy, prompting a downward revision of US, UK, and global growth forecasts.
The IMF’s latest World Economic Outlook, released ahead of the spring meetings in Washington, highlights rising protectionism and economic uncertainty as key threats to global stability.
The IMF cut its forecast for global GDP growth to 2.8% in 2025, a full 0.5 percentage points lower than projected in January. It cited Trump’s tariff hikes on April 2 and growing global trade uncertainty as the main drivers behind the slowdown. “We expect that the sharp increase in both tariffs and uncertainty will lead to a significant slowdown in global growth in the near term,” the report said.
UK and US Growth Downgraded Amid Trade Tensions
The IMF revised US growth from 2.7% to 1.8% and UK growth from 1.6% to 1.1%, reflecting the widespread impact of escalating trade barriers. Despite the UK downgrade, Chancellor Rachel Reeves pointed out that Britain remains on track to be the fastest-growing European G7 economy in 2025. Reeves is set to meet her US counterpart, Scott Bessent, in Washington to advocate for lower tariffs and defend British trade interests.
Tariffs at Century-High Levels, Business Confidence Falls
While Trump recently announced a “pause” on some reciprocal tariffs, the IMF noted that global trade barriers are now at their highest in 100 years. The lack of clarity on long-term trade policy has caused a ripple effect across global markets. “Faced with increased uncertainty about access to markets, many firms’ initial reaction will be to pause, reduce investment, and cut purchases,” the IMF said.
Financial institutions are expected to restrict credit availability, further tightening financial conditions. The IMF described these combined factors as a “global negative demand shock” that will continue to suppress economic activity.
Emerging Economies at Greater Risk Amid Rising Debts and Aid Cuts
The IMF also warned that emerging markets could suffer the worst consequences of Trump’s trade agenda. With tightening global financial conditions, these nations face greater difficulty in repaying debts, particularly as international development assistance declines. The UK’s recent aid cuts and Trump’s attempts to dismantle USAID could worsen the fiscal outlook for low-income countries.
“Reduced development assistance may increase pressure on low-income countries, pushing them deeper into debt or forcing painful fiscal adjustments,” the IMF stated.
IMF Urges Coordinated Global Action
As finance ministers prepare to gather in Washington, the IMF has called for coordinated global action to ease trade tensions, restructure developing world debt, and respond to shared economic challenges. However, the Fund warned that any global consensus may be hampered by the US’s ongoing commitment to an “America First” trade approach.
Meanwhile, Wall Street resumed its slide on Monday, reflecting investor anxiety over the continuing economic fallout. The IMF also flagged the risk of currency market volatility, particularly for fragile emerging economies. The US dollar has hit a three-year low amid Trump’s renewed attacks on Federal Reserve Chair Jay Powell, whom he labelled “Mr Too Late” for not cutting interest rates sooner.
