IMF Upgrades Global Growth Forecast for 2025 Amid Eased Tariff Tensions

The International Monetary Fund (IMF) has revised its global economic outlook upward for 2025, projecting a growth rate of 3%, up from its previous estimate of 2.8% in April. The Washington-based organization also upgraded its forecast for 2026 to 3.1% from 3%, following a reported global growth of 3.3% in 2024. The improved outlook is attributed to a de-escalation of tariff tensions initiated by the U.S. under President Donald Trump, which has spurred a recovery in global trade and supported broader economic expansion. Earlier in the year, Trump had threatened to impose severe import tariffs on major exporters, including the UK, EU, China, and South Korea, citing concerns over unfair competition. The announcement led to significant market volatility, with stock markets declining and the U.S. dollar weakening as investors turned to safe-haven assets. However, the U.S. later delayed or reduced these tariffs in exchange for commitments from other nations to purchase U.S.-made goods, a move that reversed market declines and contributed to the more positive economic outlook. Despite the optimistic revision, the IMF cautioned that U.S. policies remain 'highly uncertain,' with risks to global growth tilted 'firmly on the downside.' IMF Chief Economist Pierre-Olivier Gourinchas emphasized the fragility of the current economic recovery, noting that unforeseen policy shifts could undermine progress. The organization urged vigilance among policymakers to address potential challenges. Regionally, the improved global outlook has benefited several economies, including the UK, which is now expected to grow by 1.2% in 2025, an increase of 0.1 percentage points from the IMF’s April forecast. This positions the UK as the fastest-growing European economy within the G7, despite ongoing global economic challenges. UK Chancellor Rachel Reeves welcomed the forecast, highlighting the government’s commitment to further growth through investments in jobs, transport, affordable housing, and major projects such as Sizewell C. The IMF’s report underscores the interconnected nature of global trade and policy decisions, with the recent easing of tariff tensions providing a temporary boost to economic projections. However, the organization’s warnings about uncertainty and downside risks serve as a reminder of the potential fragility of the current recovery.