Europe's economy to see the UK lead in rapid expansion for the next two years
The International Monetary Fund (IMF) has issued a cautionary note about the impact of US tariffs on the global economy, stating that while some short-term mitigating factors may have lessened the initial shock, the tariffs remain a significant risk factor.
The IMF's new predictions for the UK include a factor called "front-loading," or a rush of imports into the US before tariffs took effect. This temporary boost to activity is expected to fade in the second half of 2025, revealing a more persistent negative impact in 2026.
According to the IMF, the initial trade shock from US tariffs could be less damaging than initially feared, but it remains sizeable and has lowered global growth estimates by about 0.2 percentage points this year relative to pre-tariff forecasts.
The IMF's chief economist, Pierre-Olivier Gourinchas, has expressed hesitancy about US tariffs, stating that the world economy is still hurting and will continue to do so with current tariff levels. Gourinchas also mentioned the need to monitor whether trade deals are sticking, unravelled, or followed by other changes in trade policy.
The IMF has revised its economic growth prediction for the UK, citing softened US tariffs as a significant factor. The UK is now predicted to be the third fastest-growing economy in 2025 and 2026, trailing the US and Canada. The UK's projected economic growth for 2021 is 1.2 percent, and 1.4 percent in 2026.
It is important to note that the IMF has not included the steeper tariffs on certain products (cars, steel and other metals, pharmaceuticals, computer chips, and trade deals between Japan and the EU) in their numbers.
Global inflation is expected to remain above the ideal, despite a predicted fall in price rises. The IMF predicts that the global pace of price rises will fall 4.2 percent in 2025 and 3.6 percent in 2026.
The current global growth predictions are far from the pre-pandemic historical average of 3.7 percent. The IMF had previously predicted a 3.3 percent global growth rate for both 2025 and 2026, but the current prediction is lower. However, the revised global economic growth predictions are significantly more positive than the April calculations (2.8 percent and 3 percent, respectively).
In conclusion, the IMF’s stance is that US tariffs are still a considerable risk factor for global economic growth, causing a noticeable slowdown in trade and growth despite some short-term mitigating factors. This reflects a cautious optimism about resilience tempered with concern over ongoing tariff-related headwinds.
The IMF has expressed concern over the impact of US tariffs on global business and finance, with the trade policies causing a significant risk factor for economic growth. The IMF's predictions for the UK's economy reveal a more persistent negative impact of US tariffs in 2026, potentially slowing down business activities.
