Trump's Tariff Threats Loom Over UK's Economy

US President Donald Trump's planned reciprocal tariffs could shrink the UK economy by 1%, according to the OBR. The British government is negotiating to avoid these tariffs, which aim to cut the US trade deficit. Higher tariffs may lead to increased inflation and a smaller fiscal buffer for the UK.

The United States is contemplating punitive tariff measures that could severely impact the British economy, contracting its size by as much as 1%, according to the UK's fiscal watchdog.

If the US imposes reciprocal tariff hikes against all trade partners, as proposed by President Trump, forecasts suggest significant economic repercussions for Britain, including heightened inflation and diminishing fiscal reserves. The prospective tariffs are part of Trump's strategy to balance the $1.2 trillion US goods trade deficit by mirroring international tariff levels.

The British government, keen to shield its economy from such blows, is actively seeking a new economic arrangement with the United States. Negotiations have been initiated by Prime Minister Keir Starmer and Business Minister Jonathan Reynolds to mitigate these looming tariffs, while the ongoing trade discussions highlight the tense diplomatic dynamics at play.

(With inputs from agencies.)