Reeves warned she will’t blame Trump as IMF slashes UK development forecast | Politics | News | EUROtoday

Rachel Reeves has been warned to not blame Donald Trump’s international commerce battle for Britain’s financial woes after the International Monetary Fund stated home coverage was the principle issue behind the UK’s sluggish development. Meanwhile the United States is known to be drawing up phrases for commerce talks with the United Kingdom, together with calls for for a lower to the UK’s 10% automotive tariff and looser guidelines on US agricultural imports resembling beef.

The IMF lower its forecast for UK GDP development subsequent yr from 2% to 1.5%, citing a string of homegrown pressures together with the Chancellor’s £40bn tax will increase and better rates of interest.

Pierre-Olivier Gourinchas, the IMF’s chief economist, stated: “The tariffs are playing a role as they are in most countries, and it’s weighing down on growth in the UK. “But there are some UK specific factors, and I would say in terms of the downgrade for 2025, domestic factors are probably the biggest ones.” The warning got here because the Chancellor travelled to Washington for talks with US officers, together with Treasury Secretary Scott Bessent, amid rising concern concerning the international financial outlook.

Mr Gourinchas stated: “Weaker growth in the second half of last year is still weighing on the economy. It’s also the case that long-term interest rates are still elevated, and that has a drag on economic activity.”

The UK’s 2025 development downgrade was the sharpest of any main economic system, and the Fund now expects British inflation to common 3.1% this yr — increased than some other G7 nation and above the US at 3%.

Despite latest fears that Mr Trump’s international tariffs may gasoline inflation, Mr Gourinchas stated: “The effect of tariffs on countries like the UK … is lowering price pressures, not increasing them.”

The IMF additionally stated worth pressures would persist this yr because of a collection of things together with increased vitality payments, council tax, water prices, the National Living Wage enhance and the rise in employers’ nationwide insurance coverage contributions.

Ms Reeves responded by insisting she was combating for British pursuits abroad. She stated: “The report also clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade.”

However, the IMF’s verdict will enhance strain on Ms Reeves. With the UK’s borrowing prices nonetheless excessive and the Chancellor’s headroom lowered to only £9.9bn, any additional slowdown dangers blowing a gap in her fiscal guidelines.

The Fund additionally warned that if Mr Trump escalates his international commerce battle, it may shave $1 trillion off international GDP by 2027.

It stated: “Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near- and long-term growth.”

A draft circulated by the Trump administration and seen by the Wall Street Journal additionally proposes revising guidelines of origin and decreasing non-tariff boundaries, although officers pressured the plans should not closing. A White House spokesman stated any deal would in the end be determined by Mr Trump himself.