Donald Trump will deal Rachel Reeves a huge blow if he acts on a threat to impose tariffs on the UK next week. The Office for Budget Responsibility (OBR) halved its growth forecast for this year after the Chancellor announced £14billion in cuts to fix the public finances in her Spring Statement on Wednesday (March 26). The OBR warned of a 50% chance Ms Reeves would be forced to make more cuts or tax rises as early as October should the state of the economy get worse. It said US tariffs of 20% on UK exports would wipe 0.6% from GDP growth by 2026.
If the UK were to retaliate with tariffs on US exports, then this increases to one percent of GDP. The budget watchdog warned that Ms Reeves’s decision to maintain a “tiny” cushion of £9.9bn would mean minor changes to the economy could wipe out her fiscal headroom. This could be through Trump’s tariffs, increased borrowing costs or worsening productivity.
Mr Trump said on Wednesday he was placing 25% tariffs on car imports in a move the White House claimed would boost domestic manufacturing, but could also put a financial squeeze on carmakers which depend on global supply chains.
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