Rachel Reeves is flying into Trump's firestorm - and it will cost the UK (2025)

One of the more fun parts of the Chancellor of the Exchequer’s job is taking part in the prestigious spring meetings of the International Monetary Fund (IMF) and the World Bank in Washington.

Rachel Reeves might be especially relieved to escape from disobliging domestic growth forecasts, being blamed for swingeing welfare cuts and arguing with Angela Rayner about limits to employment rights.

Also, it hardly harms a newish Chancellor to be feted at the glamorous UK embassy residence reception nor to meet in the VIP suite with the world’s top bank governors and financiers. A slot with US Treasury Secretary Scott Bessent will, she hopes, help nudge that big, beautiful, but still elusive UK trade deal over the line.

Yet turbulence did not take long to set in after leaving Heathrow. Reeves is flying into the molten heart of a firestorm, which could prove costly to the fragile global economy and the UK’s aspirations of gaining closer links with the US.

Not content with having set off a dizzying yo-yo in stock prices (which remain down over 10 per cent since the start of the year), President Trump has picked a public fight with the chairman of the mighty Federal Reserve, the central bank which guides interest rate and employment policy. He wants its chair, Jerome Powell, to cut interest rates “preemptively” in order to offset the negative impacts of the tariff splurge and fire up the domestic economy before the mid-term elections.

This clash worsened on Sunday night when the President took to his Truth Social platform, branding Powell “Mr Too Late – a major loser” whose “termination cannot come fast enough”. Powell is in the post for another year.

The impact has roiled the stocks and bond markets and means that Powell, a Trump appointee from the first administration, embarks on the shindig in DC with a target on his back and Trump muttering darkly about finding ways to “get him out”.

Things only got worse: on Tuesday, the IMF downgraded its global growth forecasts, and the Wall Street Journal, the bible of the investor and banking classes, is headlining the market, seeing the “worst April since 1932, as investors send ‘no confidence’ signal”. This little local difficulty has global implications – and as the IMF’s gloomy lookahead noted, the UK is especially heavily exposed to a downturn in the US.

This leaves Reeves with (at least) two headaches.

The first is how to keep the focus of distracted officials and senior figures influential with Trump who prefer a less wide-ranging tariff policy – like Scott Bessent – focused on the UK trade deal when the US economy is in convulsions of its own.

The second is a creeping sensitivity in Downing Street about being seen to be in the waiting room of American power under a President who is, at best, an unreliable ally. So Team Reeves has been heavily briefing that her aim in securing a deal is to shore up the importance of any deal being “front and centre [about] British national interest”.

It is emblematic of a worry that Britain will be seen to be subjected to Trumpian whims, but get little back. For that reason, after a lengthy Cabinet discussion, Starmer and Reeves stuck with ruling out any watering down of food production standards – so no chlorinated chicken clucking close to our plates.

However, coming to an agreement on export quotas on foodstuffs, let alone a significant exception to the 25 per cent car and steel tariffs, still feels ambitious. So, the Chancellor is playing down expectations and signalling this will be a week of trust-building rather than a dramatic breakthrough.

The Powell stand-off is also a social complexifier. Reeves is at the spring meetings to defend global trade and declare Britain open to it. But the main game in town is the President doubling down on disdain for international institutions. As one advisor to Trump in the first administration put it to me: “In 2016, the Maga message looked like something a smart New York money guy [Trump] used to get power. Under the 2.0 version, it feels like he has drunk the whole Kool-Aid machine.”

Possibly more significant than these spats is that China is signalling an increasingly cold shoulder to any countries who rush to trade deals with the US and is leaning on trade partners to distance themselves from Trump. This is a minefield for Reeves, who has overseen the UK’s economic warm-up to Beijing and staked some of her authority on that paying dividends despite many concerns about the wisdom of relying on a strategic opponent for deals. Conversely, too much China in the trade mix is hardly likely to delight Donald Trump.

This week, the economic and finance titans meeting feels like a large therapy session to address shared trauma.

Many of those the President once feted or socialised with are starting to press the worry button: Ken Griffin, chief executive of hedge fund Citadel, has lambasted the scale of tariffs as “a huge policy mistake”; Ray Dalio, the billionaire “thought leader” who knows Trump well from their shared New York days, believes that the US is “very close to a recession”. Even the more reserved Goldman Sachs CEO David Solomon is complaining that clients are struggling to place investments – because they cannot make forecasts with any confidence.

So Reeves is showing up in a US which is seeing the cornerstone of its financial and economic model battered by a wilful President in a hurry. Success, as one seasoned Washington diplomat puts it, would be “making any progress at all”. Getting out of the cauldron unscathed would do.

Anne McElvoy is executive editor at POLITICO and will co-host Politics at Sam and Anne’s this week from Washington