Trump tariffs: Rachel Reeves dealt hammer blow as UK progress set to gradual | Politics | News | EUROtoday

Donald Trump’s tariffs blitz may imply the UK’s financial progress is as much as 0.5 proportion factors decrease than anticipated within the coming years, an knowledgeable has warned. In his “Liberation Day” announcement, the US president slapped a ten% tariff on American imports of UK items as he hit out at “exorbitant” VAT charges.

It got here as he introduced heavier tariff plans on a raft of different nations, together with a 20% levy on imports from EU nations. UK automotive producers might be hit by a 25% tariff on all international vehicles imported to the US, which specialists have mentioned may put 25,000 UK jobs in danger. Experts careworn the UK has prevented a “direct blow” however will nonetheless face a “significant” impression.

Thomas Pugh, economist at RSM UK, mentioned: “The direct impact on the UK is likely to be in the 0.2% to 0.5% of GDP range over the next few years, combining both the impact of the 10% flat tariff and the 25% tariff on automotives.

“The impact will be bigger once the hit to the US and European economies becomes clearer and is taken into account.

“Given we expect growth of 1% this year and 1.5% next year, it implies another year of stagnation at best.”

He added that he believes the impression of the tariffs might be “not far off” wiping out Chancellor Rachel Reeves’s fiscal headroom within the subsequent Budget within the autumn.

Pantheon Macroeconomics’ Rob Wood advised the financial impression can be much less heavy however indicated it may end in extra cuts to rates of interest.

Economists have mentioned the UK at present exports about £60billion in items to the US, together with prescribed drugs, vehicles and know-how tools.

Experts have indicated the impression of the tariff plans is not going to be as unhealthy as many had feared.

The UK’s official financial forecaster, the Office for Budget Responsibility, warned final month {that a} extra extreme situation wherein the UK and different nations additionally retaliated to the imposition of tariffs would have dragged UK GDP 0.6 proportion factors under forecasts this yr.

It had mentioned this may have had a one proportion level impression subsequent yr and “almost entirely eliminate” the Chancellor’s £9.9billion headroom towards her fiscal guidelines.

Rain Newton-Smith, chief govt of the Confederation of British Industry, mentioned: “A cool and calm reaction from the UK Government is the right response: UK firms need a measured and proportionate approach which avoids further escalation.

“Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices.”