UK (Parliament Politics Magazine) – Bank of England warns Trump’s tariffs risk global shocks and recession, warning of severe financial shocks and slower economic growth.
As reported by The Telegraph, the Bank of England says Trump’s trade war increases global vulnerability to financial and economic instability.
What did FPC say about rising global risks from tariffs?
The Bank’s Financial Policy Committee stated that global risks have intensified and uncertainty has grown since November. US tariff policies continue to raise concerns over global growth and inflation.
The committee warned,
“The global risk environment has deteriorated, and uncertainty has intensified. The probability of adverse events, and the potential severity of their impact, has risen.”
Andrew Bailey, head of the FPC, stated that “the risk of further sharp corrections remains high.”
The FPC said,
“Risks associated with debt sustainability concerns, including sharp increases in government bond yields, could crystallise relatively quickly, particularly if accompanied by rapid capital outflows. Increased debt levels and servicing costs for governments as debt was refinanced could also reduce their capacity to respond to future shocks.”
It raised concerns that Mr Trump’s actions pose serious risks to the economy worldwide.
In their latest meeting, the minutes stated that
“global trade policy uncertainty had intensified and some risks had crystallised. The United States had made a wide range of tariff announcements on 2 April, and some governments had responded with their tariff announcement. This had contributed to a material increase in the risks to global growth and a weakening of the central outlook, as well as increased uncertainty over the outlook for inflation globally.”
The Bank warned that inflation remains uncertain, and economists believe Trump’s tariffs will raise prices and restrict the US Federal Reserve’s ability to lower rates for growth support.
The committee also highlighted that Britain’s open economy and significant financial sector make it especially vulnerable to financial shocks.
It stated,
“Higher government bond yields would also increase the cost of borrowing and refinancing of debt for households and businesses.”
The FPC believes the UK banking sector remains resilient, with sufficient capital buffers to face significant shocks.
Experts’ views on the global recession
German Finance Minister Jörg Kukies warned that the country’s economy could face another recession due to trade tensions.
The financial services company, JP Morgan, says there is a 60% chance that the global economy will enter a recession this year.
Trump’s tariffs’ impact on the UK economy
The UK’s goods exports to the United States reached £58bn in 2024.
The previous levies on steel, aluminum, and cars were ready to impact the economy.
The British Prime Minister, Keir Starmer, recognized the economic impact of the 10% tariff, stating, “Clearly, there will be an economic impact.” He assured that he will work to secure the best deal for the UK.
While the UK has not yet introduced taxes on US imports, it is currently preparing a list of potential products for retaliatory levies.
Economic leaders have raised concerns that US tariffs might derail the British economy and hinder the government’s ability to meet its borrowing targets.
Top 5 UK goods exports to the US in 2024
- Cars: £9.0bn
- Medicinal and pharmaceutical products: £6.6bn
- Mechanical power generators: £4.6bn
- Scientific instruments: £2.4bn
- Aircraft: £2.2bn
Global reactions to Trump’s tariffs
- EU: Set to impose tariffs on US goods starting April 15, 2024.
- Canada: Imposed a 25% tariff on some US vehicles from April 9, 2024.
- Ireland: Condemns tariffs as “regrettable” with no justification.
- Australia: Criticized the tariffs, calling them “not the act of a friend.”
- Japan: Imposed a 24% tariff, calling it “regrettable” and possibly violating agreements.