In marked reversal, the International Monetary Fund (IMF) has slashed its growth forecast for the United States. They have recently tempered their outlook to just a 1.8% increase this year. That’s a big decrease from their previous projection of 2.7% issued in January. Consequently, it is the biggest such downgrade of any advanced economies. The revision follows as persistent uncertainty over trade tariffs wreaks havoc on economic conditions.
The IMF has continued to downgrade the forecast. They largely point to the effect of tariffs that the U.S. levied on China under then-President Donald Trump. Tariffs on Chinese products can reach as high as 145%. In retaliation, China has placed its own tariffs (at 125%) on American goods. This major and intensifying trade conflict adds more uncertainty to the equation for businesses and investors both, playing no small part in the downgrade of growth expectations.
The IMF has slashed its forecasts for the UK economy. Retail sales only increase by 1.1% in 2025, lowered from an earlier figure of 1.6%. The report adds that there are global impacts from US trade tariffs that are driving this forecast.
IMF chief economist Pierre-Olivier Gourinchas put the present state of the global economy in stark terms. He stated, “It is now being severely tested once again,” highlighting that many nations still bear significant scars from the severe shocks of the past four years. The IMF predicts that UK inflation will peak at 3.1% this year, the highest in any advanced economy. This increase is almost entirely driven by increasing prices for basic necessities, such as energy and water.
Furthermore, the IMF anticipates that the Bank of England will implement three additional interest rate cuts by 2025 in response to these economic challenges. The aggressive monetary policy actions are indicative of the extraordinary moves taken to address precarious economic conditions with elevated inflation and low growth forecasts.
“In light of these recent changes, UK officials are getting busy. “The report clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade,” stated British politician Reeves, underscoring the importance of international collaboration in navigating these turbulent economic waters.