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Donald Trump’s tariffs on international US imports will dent the UK authorities’s fragile development ambitions and hit key manufacturing sectors, trade teams and economists have warned.
The ten per cent levy — whereas lower than the 20 per cent confronted by the EU — will weaken demand and disrupt provide chains, at a time when companies are already going through rising prices, they mentioned.
“Orders will drop, prices will rise, and global economic demand will be weaker as a result,” mentioned Shevaun Haviland, director-general of the British Chambers of Commerce. “This is a lose-lose situation for everyone.”
Emma Rowland, commerce coverage advisor on the Institute of Administrators, mentioned the tariffs could be “a blow to British businesses”, that might pressure many to reassess the viability of the US as each a market and a supply-chain hub.
The UK’s financial system has barely grown for the reason that spring of final 12 months, whereas the outlook for 2025 has worsened.
Andrew Goodwin, chief economist on the consultancy Oxford Economics, now expects the UK financial system to develop at slightly below 1 per cent in 2025 and has reduce the 2026 forecast to shut to 1 per cent from earlier estimates of 1.5 per cent, because of the bigger than anticipated tariffs on US imports.
The Workplace for Finances Accountability has already warned that any slowdown within the UK’s development will eat into the monetary headroom put aside by Rachel Reeves — one thing that might pressure the chancellor to lift taxes additional later within the 12 months.
Thomas Pugh, an economist at audit, tax and consulting agency RSM UK, mentioned the tariffs imply “another year of stagnation at best”.
Markets have already tweaked their expectations for what the tariffs imply for Britain’s rates of interest. “This reduction in growth will probably make the Bank of England more likely to cut interest rates this year, so we still anticipate three more [quarter-point] cuts in 2025.”
Pugh echoed issues that decrease development would eat into Reeves’ already restricted fiscal headroom. “We wouldn’t go as far as to say this has wiped out the £10bn she just rebuilt, but it’s probably not far off,” he added.
Though the UK sells extra providers than items to the US, key export industries had been left reeling after Wednesday’s announcement.
British farmers have warned the ten per cent tariff might hit the £2.5bn agrifood and drink export market. The US is the UK’s second-largest vacation spot for British meals exports after the EU.
“While the UK has been hit by a lower baseline tariff compared to the EU, this remains a challenge for the UK and for agriculture,” mentioned Nationwide Farmers’ Union president Tom Bradshaw.
Scotland’s deputy first minister Kate Forbes additionally warned the tariff on UK items might result in annual losses of £200mn —£400mn in Scotch whisky exports. “This is a matter of huge concern for industries most affected,” she mentioned.
There was some aid within the UK’s struggling metal sector after the White Home opted to not apply extra tariffs on prime of an current 25 per cent levy. However trade teams warned of oblique results if UK corporations exporting completed items reduce manufacturing. The auto sector, which makes up 14 per cent of UK metal demand and likewise faces a 25 per cent US tariff, could possibly be significantly uncovered.
Though Britain’s automotive trade is closely reliant on European exports, round one in six of the vehicles shipped goes to the US, and it’s the largest marketplace for high-end manufacturers resembling JLR, Bentley and McLaren.
“These tariff costs cannot be absorbed by manufacturers,” mentioned Mike Hawes, chief government of the Society of Motor Producers and Merchants.
“US consumers may face additional costs and a reduced choice of iconic British brands, while UK producers may have to review output in the face of constrained demand,” he added.
Some UK producers, nonetheless, see a possible upside. James Leng, managing director of Pre-Met, which assembles steel parts, mentioned: “Manufacturing in the UK, potentially, just became 10 per cent more competitive than the EU — and even more so compared with other low-cost countries.”
Trump hit Thailand, Vietnam, Taiwan, and Indonesia with tariffs starting from 25 per cent to 46 per cent.
“Potentially, I could see some global firms at the top of the supply chains, starting to look down their suppliers for UK-based production,” mentioned Leng.
Broadly, enterprise associations are urging the federal government not to surrender on negotiations over a commerce deal that Sir Keir Starmer has mentioned might result in an elimination of tariffs altogether.
“Tariffs can be lifted at any time and the US has signalled its willingness to do some form of deal with us,” mentioned Haviland.
Reeves mentioned forward of Trump’s announcement on Wednesday that there wouldn’t be any rush to answer US tariffs, however she warned that even when there may be an settlement with the US, “that doesn’t mean somehow we are out of the woods and not impacted by tariffs”.
