IMF Warns on Trump's Economic Policies while Upgrading UK's Growth Forecast
As the UK receives a growth forecast boost, incoming US President Trump's tariff threats raise global economic concerns.
The International Monetary Fund (IMF) has delivered a mixed message in its latest global economic report, with a significant upgrade in the United Kingdom's growth forecast overshadowed by concerns about President-elect Donald Trump's economic policies.
The IMF revised its prediction for the UK's economic growth in 2023 to 1.6%, slightly up from an earlier estimate of 1.5%, reflecting a more optimistic view amid recent challenges.
However, the IMF's outlook was overshadowed by stern warnings about potential repercussions from Trump's economic strategies, specifically his plans to introduce a series of tariffs.
These measures could heighten trade tensions, dampen investment, and disrupt global supply chains, impacting economies far beyond US borders.
While the short-term impact of such policies, including tax cuts and deregulation, could potentially stimulate the US economy, the IMF cautioned that the long-term consequences might be counterproductive.
The prospect of higher import taxes in the US is particularly worrisome for businesses and international leaders, who fear it could escalate costs for companies selling goods into the vast American market.
Tariffs are central to Trump's vision for economic revitalization, aimed at fostering domestic job growth and boosting tax revenue.
Trump has announced intentions to impose tariffs against countries such as China, Canada, and Mexico upon his assumption of office.
Central to Trump's proposals is a potential 100% tariff on the BRICS nations should they attempt to establish a currency to rival the US dollar.
The IMF warns that this could lead to an inflationary surge and subsequent economic downturn, posing risks to US Treasury bonds' status as secure investments.
In contrast to these global challenges, the IMF's upgraded forecast for the UK economy could offer some relief to Chancellor Rachel Reeves, who has faced scrutiny over stagnant economic figures.
Despite last year's disappointing growth, the IMF suggests that the UK may outperform major European economies, including Germany, France, and Italy, in the coming years.
Amid these economic forecasts, tensions arise from Trump's pending induction into office, which dominates discussions on potential risks in the IMF's latest biannual global economic report.
Similar policies during his previous term led to trade conflicts, notably with China and the European Union.
This time, proposed measures include a 10% global tariff, 25% on imports from Canada and Mexico, and a significant 60% tariff on Chinese products.
Such steps could undermine US Treasury securities, historically viewed as among the world's safest investments, potentially impacting global financial stability.
Additionally, excessive deregulation could spur a stronger dollar, potentially siphoning capital from emerging markets and further straining global economic growth.
Compounding these concerns, proposed deportations could permanently reduce the US's productive capacity while pushing inflation higher.
The IMF's Chief Economist, Pierre-Olivier Gourinchas, noted that uncertainty surrounding Trump's policy directions is already affecting stock markets worldwide.
Echoing the IMF's concerns, the World Bank recently cautioned that US tariffs might impede trade growth and suppress global economic expansion, forecasting a tepid global growth rate of 2.7% for 2025. This would mark the weakest growth trajectory since 2019, barring the acute contraction during the peak of the Covid-19 pandemic.
The IMF revised its prediction for the UK's economic growth in 2023 to 1.6%, slightly up from an earlier estimate of 1.5%, reflecting a more optimistic view amid recent challenges.
However, the IMF's outlook was overshadowed by stern warnings about potential repercussions from Trump's economic strategies, specifically his plans to introduce a series of tariffs.
These measures could heighten trade tensions, dampen investment, and disrupt global supply chains, impacting economies far beyond US borders.
While the short-term impact of such policies, including tax cuts and deregulation, could potentially stimulate the US economy, the IMF cautioned that the long-term consequences might be counterproductive.
The prospect of higher import taxes in the US is particularly worrisome for businesses and international leaders, who fear it could escalate costs for companies selling goods into the vast American market.
Tariffs are central to Trump's vision for economic revitalization, aimed at fostering domestic job growth and boosting tax revenue.
Trump has announced intentions to impose tariffs against countries such as China, Canada, and Mexico upon his assumption of office.
Central to Trump's proposals is a potential 100% tariff on the BRICS nations should they attempt to establish a currency to rival the US dollar.
The IMF warns that this could lead to an inflationary surge and subsequent economic downturn, posing risks to US Treasury bonds' status as secure investments.
In contrast to these global challenges, the IMF's upgraded forecast for the UK economy could offer some relief to Chancellor Rachel Reeves, who has faced scrutiny over stagnant economic figures.
Despite last year's disappointing growth, the IMF suggests that the UK may outperform major European economies, including Germany, France, and Italy, in the coming years.
Amid these economic forecasts, tensions arise from Trump's pending induction into office, which dominates discussions on potential risks in the IMF's latest biannual global economic report.
Similar policies during his previous term led to trade conflicts, notably with China and the European Union.
This time, proposed measures include a 10% global tariff, 25% on imports from Canada and Mexico, and a significant 60% tariff on Chinese products.
Such steps could undermine US Treasury securities, historically viewed as among the world's safest investments, potentially impacting global financial stability.
Additionally, excessive deregulation could spur a stronger dollar, potentially siphoning capital from emerging markets and further straining global economic growth.
Compounding these concerns, proposed deportations could permanently reduce the US's productive capacity while pushing inflation higher.
The IMF's Chief Economist, Pierre-Olivier Gourinchas, noted that uncertainty surrounding Trump's policy directions is already affecting stock markets worldwide.
Echoing the IMF's concerns, the World Bank recently cautioned that US tariffs might impede trade growth and suppress global economic expansion, forecasting a tepid global growth rate of 2.7% for 2025. This would mark the weakest growth trajectory since 2019, barring the acute contraction during the peak of the Covid-19 pandemic.
