The downgraded forecasts make it more likely that Labour Chancellor Rachel Reeves will have to make further cuts or hike taxes in her autumn budget.
Donald Trump(Image: Win McNamee, Getty Images)
The fallout from Donald Trump’s tariffs is set to hit the UK harder than Europe, according to the International Monetary Fund (IMF).
The IMF said UK growth is down by 0.5 per cent from January’s forecast. This means our economy will only grow by 1.1 per cent next year and 1.4 per cent the year after.
It makes it more likely that Labour Chancellor Rachel Reeves will have to make further cuts or hike taxes in her autumn budget.
The IMF’s top economist Pierre-Olivier Gourinchas 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.”
The UK’s fall in worse than the 0.2 per cent decrease that Europe is facing.
This is despite Trump’s suggested 20 per cent tariff on the EU being double the UK’s 10 per cent levy.
But the UK’s growth forecast for this year of 1.1 per cent is still higher than Europe’s 0.8 per cent rate.
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The fall in UK growth is due to Trump’s tariffs driving up the cost of UK Government borrowing and sky-high energy costs because of Russia’s invasion of Ukraine.
Reeves said the new forecasts show “the UK is still the fastest-growing” European country in the G7.
“The IMF have recognised that this Government is delivering reform which will drive up long-term growth in the UK, through our Plan for Change,” she said.
“The report also 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.”
Rachel Reeves could face some tough decisions(Image: (Image: Getty))
The IMF boosted Britain’s forecasts for 2028 and 2029 by 0.1 per cent each.
Reeves already raised national insurance for employers in last year’s budget and introduced benefit cuts in the spring statement.
The IMF said it expects the UK to have higher inflation than other countries.
It warned in the forecast: “The United Kingdom and the United States stand out in both the direction and the magnitude of their revisions”.
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