The world economy will grow faster than expected after the impact of Donald Trump’s tariff war waned and imports to the US surged, new projections show.
Britain is in line for a small boost with the IMF upgrading its growth predictions by just 0.1 per cent for 2025. Growth is expected to sit at 1.2 per cent this year and 1.4 per cent for 2026, the International Monetary Fund’s (IMF) latest World Economic Outlook forecasts.
It came as the IMF said the global economy would be more resilient than it expected in May. Global growth is set to be 3 per cent this year and 3.1 per cent next year, up from 2.8 per cent and 3 per cent respectively.
Like Britain, Germany and Italy have both had their growth upgraded by 0.1 per cent for 2025, and received no upgrade for 2026. Meanwhile, Canada was handed a marginally bigger upgrade of 0.2 per cent in 2025 and 0.3 per cent in 2026, taking its growth to 1.6 per cent in 2025 and 1.9 per cent in 2026.
The world growth upgrade reflects what the IMF called front-loading in recent months, with countries rushing to ship goods to the US to get ahead of Mr Trump’s tariffs.
This has happened as businesses and households tried to prepare for planned increases to US tariff rates, following Mr Trump’s “liberation day” announcements in April, according to the report.
The IMF said front-loading had “shaped economic activity in the first half of the year”, adding that it was “creating exposures that could amplify the impact of any potential negative shocks”.
For example, firms could end up having too much stock, therefore pushing down future imports, or it could lead to additional holding costs or the risk of items becoming obsolete.
Meanwhile, the growth upgrade since April was also driven by US tariffs being lowered since higher rates were first announced by Mr Trump, alongside improved conditions in the financial markets.
This came after the US struck new trade deals, including with the UK and, most recently, the EU. But the UK’s growth rate flatlining while trade deals benefited other economies poses fresh questions for Rachel Reeves.
The chancellor has been accused of stalling growth with her and Sir Keir Starmer’s economic doom and gloom after taking office last July and through October’s tax-hiking Budget.
She has a multi-billion pound black hole to fill ahead of this autumn’s Budget and is considering a range of potential tax hikes and spending cuts to balance the country’s books.
The Conservatives said under Labour “growth is going nowhere”, adding that the IMF report confirms that.
Shadow chancellor Mel Stride said: “Business confidence has collapsed all because of the chancellor’s reckless economic choices.
“You can’t tax your way to growth – we need to back British businesses and workers.
“Yet Rachel Reeves looks set to do it all over again in the autumn – yet more taxes, yet more pain for our economy.”
But Ms Reeves said the forecast still forecasts the UK to have the highest growth in the G7.
The chancellor said: “I am determined to unlock Britain’s full potential, which is why we are investing billions of pounds through our Plan for Change – in jobs through better city region transport, record funding for affordable homes, as well as backing major projects like Sizewell C to drive economic growth and put more money into people’s pockets.”
Countries also benefited via the introduction of some higher tariff rates while others were paused until August, notably between China and the US, helping diffuse escalating trade tensions and open the door to negotiations.
However, the IMF warned that a “rebound in effective tariff rates could lead to weaker growth” and weigh on wider sentiment.
“Elevated uncertainty could start weighing more heavily on activity, also as deadlines for additional tariffs expire without progress on substantial, permanent agreements,” the report said.
Furthermore, the IMF flagged conflict in the Middle East creating potential risks to global shipping and trade, which could further raise commodity prices like oil.
On the other hand, the report found that global growth could be lifted if trade negotiations lead to lower tariffs, ease tensions, and create more certainty and predictability.
The IMF also highlighted technological advancements, including the use of artificial intelligence (AI), as a way to further boost growth around the world.
