In the UK, the pressure on prices from US tariffs would be added to increased government spending, which NIESR said would prevent the Bank of England from making steep cuts to the cost of borrowing.
UK economy on course for 1.5% expansion, NIESR predicts Thinktank cautions Trump tariffs could blow hole in forecast, with 63% of UK firms exporting to US expecting to be hit.
On Tuesday, Catherine Mann, a member of the central bank’s rate-setting monetary policy committee, said in a speech that she had supported a larger cut in interest rates last week in response to a weakening economic outlook that would be characterised by lower wages growth and weak inflation.
The British economy is on course to expand by 1.5% this year after the budget gave a boost to public spending but could be blown off course if Donald Trump goes ahead with threatened tariffs, a leading economic thinktank has warned.
However, it cautioned that an expansion of tariffs after the US president’s 10% levy on imports from China and 25% on Canada and Mexico – now paused for a month – could reduce the pace of growth to 1.3%, and by more if they hit UK businesses directly.
