Closing post
Time to recap…
The International Monetary Fund has warned that Donald Trump’s tariffs have unleashed a “major negative shock” into the world economy, and cut its forecasts for US, UK and global growth.
The Washington-based lender has cut its forecast for global GDP growth to 2.8% for this year – 0.5% weaker than it was expecting as recently as January.
Its forecasts show every major economy being hit, with the UK expected to grow by 1.1% this year, down from 1.6% predicted in January. The IMF expects a sharper deterioration for the US, from 2.7% to 1.8%.
In its latest World Economic Outlook, the IMF says:
“We expect that the sharp increase on 2 April in both tariffs and uncertainty will lead to a significant slowdown in global growth in the near term.”
At a press conference in Washington DC, the IMF also explained that the UK’s downgrade was due to domestic factors – including weak growth at the end of 2024 – more than due to Trump’s trade war.
The Fund has also raised the chances of a US recession in the next year to almost 40%.
The IMF is also concerned that the global financial system is coming under increasing strain as Donald Trump’s trade war rocks markets.
“Global financial stability risks have increased significantly,” the IMF said in its regular snapshot of the system, urging regulators to be on the alert for potential crises.
It pointed to the “sharp repricing of risk assets”, that has followed the US president’s tariff announcements since February – in particular his 2 April “liberation day” statement – and warned that there may be more to come.
The Fund’s latest forecasts were released hours after the US dollar fell to a three-year low against a basket of currencies, hit by anxiety after president Trump renewed his attacks on Fed chair Jerome Powell.
Amid nervous early trading, gold hit a new record high of $3,500 per ounce.
But Wall Street has shaken off some of yesterday’s losses, with the S&P 500 index now up 2.2%, as markets rise in Europe.
FTSE 100 closes at highest since early April
Back in London, the stock market has ended the day at its highest closing levels since 3 April.
The FTSE 100 share index has closed 53 points higher at 8,328 points, up 0.65% today.
European markets also had a positive day, with Germany’s DAX up 0.3% and France’s CAC gaining 0.5%.
