Chancellor vows to "defend British interests" as IMF slashes growth forecasts
The Chancellor has said she will “defend Britain’s interests” as she meets with fellow finance ministers for talks in Washington today, and pushes for a trade deal with the US.
It comes as the International Montary Foundation (IMF) slashed growth predictions for nearly all economies around the World, including the UK, in the wake of tariffs announced by Donald Trump.
Global growth will be 0.5 per cent less than expected this year, it said, with the US economy the hardest hit.
In Washington, Rachel Reeves will spend three days for the IMF’s spring meetings, alongside finance bosses and busines heads from across the G7 and G20.
She will also hold her first face-to-face meeting with American counterpart Scott Bessant for talks on an economic deal between the US and UK.
Securing such a deal acquired a new sense of urgency earlier this month when Donald Trump announced sweeping tariffs on imports from the rest of the world.
These included 10 per cent levies on all UK goods – then the lowest level imposed on any country – along with 25 per cent tariffs on steel and cars.
Although Mr Trump rowed back from his initial announcement, instead instituting 10 per cent tariffs on all countries except China, his senior economic adviser Kevin Hassett has suggested this is a “baseline” which would require an “extraordinary deal” for the president to go below.
Mr Trump himself has said he is in “no rush” to negotiate exceptions to the tariff regime due to the revenues he claimed the charges were generating.
Ahead of her visit to Washington, Ms Reeves said: “The world has changed and we are in a new era of global trade. I am in no doubt that the imposition of tariffs will have a profound impact on the global economy and the economy at home.
“This changing world is unsettling for families who are worried about the cost of living and businesses concerned about what tariffs will means for them. But our task as a Government is not to be knocked off course or to take rash action which risks undermining people’s security.
“Instead, we must rise to meet the moment and I will always act to defend British interests as part of our plan for change.”
In its influential report published yesterday, the IMF projected global growth would fall from 3.3 per cent in 2024 to 2.8 per cent in 2025, before edging up to 3 per cent in 2026.
This is lower than the IMF’s previous forecasts, published in January, by 0.5 percentage points for 2025 and 0.3 percentage points for 2026.
The UK economy is predicted to grow by 1.1 per cent this year, 0.5 percentage points less than January’s forecast, partly reflecting tariffs, as well as weaker consumption amid higher inflation driven by bills and energy price hikes.
Growth will nonetheless be stronger in the UK than Germany – which is predicted to flatline this year – France, and Italy.
Meanwhile, inflation forecasts have been revised upwards for advanced economies since January, with the UK and the US being hit hardest.
UK inflation is set to be 0.7 percentage points higher this year, compared with the previous forecast, at 3.1 per cent – largely due to prices like water and electricity rising from April.
This is higher than all other countries in the group of seven advanced economies (G7), which incorporates Germany, France, Italy, Japan, Canada, and the US.
It added that the risk of a recession in the US had increased sharply from about a 25 per cent probability to around 40 per cent.
China is predicted to grow by 4 per cent this year, down from the IMF’s previous forecast of 4.6 per cent.
The IMF also stressed that central bank independence was important in the fight against rising inflation amid concerns over Mr Trump’s renewed attack on US Federal Reserve chairman Jerome Powell, branding him a “major loser” for not cutting rates.