Donald Trump’s tariffs have been blamed after experts issued a bleak warning about the state of the UK economy.
In a major blow for Rachel Reeves, the International Monetary Fund forecast Britain’s gross domestic product (GDP) will grow by 1.1% in 2025 – well down on their previous prediction of 1.6%.
UK inflation is also set to hit 3.1% later this year, compared to the previous forecast of 2.4%, largely due to prices like water and electricity rising from April.
The IMF said the trade war sparked by Trump’s decision to slap 10% tariffs on imports from most countries to the US, plus 25% taxes on steel and cars, was largely to blame for the worsening global economic outlook.
Pierre-Olivier Gourinchas, the organisation’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.”
The grim warning came as the UK government tries to strike a trade deal with the US which it hopes will lead to some of the tariffs on British exports to America being reduced.
Reeves, who is currently in Washington, said the IMF had acknowledged that the government is “delivering reform which will drive up long-term growth in the UK”.
“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,” the chancellor said.
Lib Dem leader Ed Davey said: “Donald Trump’s damaging trade war has taken a wrecking ball to the global economy, with the UK set to be badly hit.
“The government needs to be working to boost trade with our allies in Europe and the Commonwealth and tackle Trump’s tariffs head on.
“Simply sitting back and hoping we won’t be impacted hasn’t worked. It’s time for an urgent rethink before it’s too late.”
But shadow chancellor Mel Stride said: “The latest IMF outlook is a worrying indictment of Labour’s economic approach. Less than a year into their government, Britain is already seeing the consequences of Labour’s high-tax, high-spend agenda.”
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