UK economy at risk of higher inflation and slower growth due to Trump tariffs
Economists are concerned by the likely impact of Donald Trump’s economic policies on the UK following his historic election victory.
During the campaign, Trump threatened to increase tariffs on foreign imports by between 10-20 per cent while also placing 60 per cent tariffs on Chinese goods.
A tariff is a levy imposed on imports. By putting extra costs on businesses importing products from overseas, tariffs limit trade and lead to higher prices for consumers.
If Trump went ahead with his threats to impose blanket tariffs, economists agreed that the global economy would take a serious hit.
Government ‘would breach fiscal rules with minor rate rise’
The Chancellor would be in breach of her own fiscal rules if interest rates remain just 30 basis points higher than the fiscal watchdog forecasts, Office for Budget Responsibility (OBR) economists have said.
Giving evidence to the Treasury Committee, OBR member Tom Josephs told MPs that his colleagues conducted analysis that found “a change of the effective interest rate of 0.3 per cent…” was all that was needed for Rachel Reeves to break her pledges.
“A one percentage point increase in interest rates adds about £16bn or so to borrowing,” Josephs added.
The Chancellor chose to ramp up borrowing and spending by up to £70bn each year at last week’s Budget, leaving just £10bn of fiscal headroom to achieve her commitment to balance day-to-day spending by 2029.