How Trump’s presidency threatens rising prices for UK consumers

UK inflation could soar to 5 percent if… Donald Trump is moving forward Ministers were warned over his threat to impose massive global tariffs.

Chancellor Rachel Reeves promised push the future president support “free and open trade” to avoid damage to the British economy.

She declined to say whether Britain would retaliate in the tariff battle if Trump starts a trade warbut experts predict she could reintroduce levies on jeans, motorcycles and bourbon.

The president-elect has promised to impose high tariffs on almost all goods imported into the US, which will not only directly affect British exports, but will also slow global economic growth by reducing trade volumes around the world. There are also concerns that higher government deficits in America could lead to higher borrowing costs for other countries.

Analysis from the National Institute of Economic and Social Research (NIESR) found that if Trump introduces tariffs at the start of 2025, it could cause UK GDP growth to fall by 0.8 percent.

Inflation could rise to 4-5 percent next year from the current level of 1.7 percent, before falling to 3.5-4.5 percent in 2026.

Ahmet Ihsan Kaya, an economist at NIESR, said: “As prices in China will be more expensive and prices in Europe will be more expensive, prices in the United States will be more expensive. This spillover effect will flow back into the UK and harm UK trade with the rest of the world, not just the United States.”

Speaking before the Commons Treasury Committee, Ms Reeves said it was “too early” to say what effect Trump’s presidency would have on the British economy, but said trade ties had not suffered during his first administration.

She told MPs: “President Trump used to be President of the United States and we continue to have a strong and healthy economic relationship and we as a government will continue to advocate for free trade.”

The chancellor suggested she would push the new administration to refrain from threatening tariffs, adding: “We are not just a passive player in this, this is a trading relationship with the United States and we will be making strong statements about the importance of free and open trade just between us and the United States, but throughout the world, and the United States also benefits from access to free and open trade with us and other countries around the world.”

Ms. Reeves said that while she opposes tariffs, she supports “trying to do more with countries that share our values” – such as shifting supply chains away from China to Western allies – a move also supported by Mr. Trump.

Asked whether the UK would retaliate with tariffs on US goods if British exporters were hit with tariffs, the Chancellor said: “We’re not in that world and I’m not going to speculate.”

But Sam Lowe, a trade expert and partner at FlintGlobal, noted that the British government has a ready set of tariffs that were imposed on the US during a dispute that erupted under the first Trump administration and were suspended when Joe Biden took over.

The collections were for Harley Davidson motorcycles, Levi’s jeans and bourbon. Mr Lowe said I: “The UK has agreed with Biden to suspend these tariffs, but they are still in the system so they can be implemented.”

Another option would be to negotiate Britain’s exemption from US tariffs, but this could require painful compromises such as allowing more US agricultural products to be imported or Trump effectively joining the trade war with China. Mr Lowe said: “He is going to ask the UK and other countries to become, essentially, ‘Team Trump’ in the global sphere.”