Donald Trump’s sweeping tariffs have put global growth at risk, the Bank of England has warned, heaping pressure on government finances and increasing the likelihood of “severe shocks” to the financial system.
The Bank’s financial policy committee (FPC) said its global risk environment had deteriorated and “uncertainty had intensified” since its last update in November, with US tariff announcements contributing to a “material increase in risks to global growth” and inflation levels.
High geopolitical tensions would also have implications outside global trade, the FPC said, creating a heightened risk of cyber-attacks that could amplify other stresses and disrupt payments and financial services to UK households and businesses.
Britain will be charged the baseline rate of 10%. That has been reported as a mercy, attributed by optimistic officials to deft Downing Street diplomacy or, since the EU will pay twice as much, a happy side effect of Brexit.
The plan is still to do some kind of economic deal with Trump. The morning after the tariffs were announced, Jonathan Reynolds, the business secretary, was sticking to the line that “America is a friend; America is our principal ally.”
Trump dangled a possible trade deal that might exempt the UK from some of the costs from tariffs during the pair’s chummy White House press conference in February. There have been significant negotiations since then by a team of around 20, led out of No 10 by Michael Ellam, the Treasury and banking veteran, and the PM’s business adviser Varun Chandra alongside the business secretary.
Those talks included ideas about the UK watering down rules on electric vehicles, possible changes to a tax on tech companies (“space to talk about it”, one minister says) and changes to online safety rules (“not happening”, says a government source)
The prime minister speaks of restraint, holding back from tariff-war escalation, and calls it cool-headedness. But even if he wanted to hit back, he wouldn’t have much of an arsenal
Stock markets from Japan to Germany have also been shaken, as investors assess the wider repercussions of the actions. In the UK, the FTSE 100 has dropped about 10%.
In the meantime what can UK businesses do to protect themselves?
As ever our advice is to keep a close eye on business finances and to help you do this you can download our free cash management tool here to help you https://lnkd.in/ee3pfuGa
And if you want to talk over your current business plan or the likely consequences of insolvency we’re happy to help.
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