The International Monetary Fund (IMF) recently raised its global growth forecast for 2025. This sunny forecast follows a scaling back of harsher import duties that former President Donald Trump had once threatened. The upward revision in forecast reflects a significantly rosier outlook for the global economy than we found ourselves anticipating just a few months ago. We hope to see these growth rates increase over the next few years.
In a surprising bid to lower trade tensions, Mr. Trump backed down from the most extreme of his tariff threats. This ruling has huge significance for the world’s largest exporters—the United Kingdom, European Union, China, and South Korea. As part of this transition, the average tariff rate in the US dropped from 24% to around 17%. This action has resulted in the United Kingdom’s most welcoming climate for international trade and investment.
Noteworthy is the IMF’s projection for the global economy to grow by 3.3% in 2024. Further, they have improved the outlook for 2026 from 3% to 3.1%. The advocacy organization, headquartered in Washington, called the proposed changes a “ray of hope.” They go on to caution that risks to growth are safely consolidated on the downside. The risk of prolonged and unavoidable trade disruption would still weigh heavily on investment and economic activity.
Japan for the first time last month signed for the purchase of Boeing planes. This agreement caps tariffs on its exports to the US at a mere 15%. This FTA will continue to improve the mutual benefits of trade between our two countries. Perhaps most significantly, it points to a new and welcome trend of cutting barriers. Similar to that, Trump did agree to limit the increase of tariffs on products imported from the EU to 15%. In return, the EU wants to purchase almost £600 billion of US oil and gas. This move will make economic relationships between the two regions even stronger.
The overall US trade picture was better in June as the trade deficit narrowed to $86 billion. This was down from $96.4 billion in May. This sharp drop in deficit is good news for the potential recovery of American exports and a sign that we might be achieving a more balanced trade.
Rachel Reeves, a key figure in UK economic discussions, stated, “The IMF’s forecasts show that the UK remains the fastest-growing European economy in the G7 despite the global economic challenges we are facing.” The UK is projected to grow by 1.2% this year, maintaining its position as a leader in economic growth within Europe.
According to Gourinchas, the chief economist at the IMF, this is why strong, broad trade agreements are needed to help reduce uncertainty. He stated, “Without comprehensive agreements, the ongoing trade uncertainty could increasingly weigh on investment and activity.” This points to the importance of ongoing conversation and compromise between national trading partners to maintain consistent expansion.
Further, Gourinchas once again made the case for central bank independence as a key to stabilizing economies around the world. He remarked, “It is important to reaffirm and preserve the principle of central bank independence. The evidence is overwhelming that independent central banks, with a narrow mandate to pursue price and economic stability, are essential to anchoring inflation expectations.”