United States President Donald Trump has been identified as a significant risk to the British economy, according to the UK’s fiscal watchdog.
The watchdog expressed concerns that slow economic growth and substantial debt have made Britain particularly susceptible to the potential impacts of Trump’s proposed tariffs.
UK Finance Minister Rachel Reeves has introduced controversial reductions in welfare spending and other budget cuts, aiming to stabilize public finances and reassure investors following market turmoil experienced under former Prime Minister Liz Truss in 2022.
However, the independent fiscal watchdog warned that a global trade conflict could negatively affect Britain’s economic output. Increased interest rates from the Bank of England and rising gilt yields could further erode Reeves’s slim margin for achieving crucial fiscal targets.
“If you are going to have ‘iron-clad’ fiscal rules, then leaving yourself next to no headroom against them leaves you at the mercy of events,” explained Paul Johnson, director of the Institute for Fiscal Studies think tank.
Trump recently announced reciprocal tariffs, set to begin on April 2, targeting countries his administration believes are hindering US exports.
According to Britain’s Office for Budget Responsibility, higher US tariffs could significantly impact Britain’s economy beyond the direct effects on its exports.
Specifically, the Office for Budget Responsibility estimated that broad US tariffs on trade partners could shrink Britain’s economy—which relies heavily on international trade—by up to 1 percent.
Finance Minister Reeves and Prime Minister Keir Starmer have struggled since their election victory last July, facing rising debt costs and slow economic growth that have forced unpopular budget decisions.
Despite significant backlash from businesses following her initial budget that increased employer taxes, Reeves has remained firm in her stance.
In her most recent fiscal plan announced Wednesday, Reeves introduced cuts to welfare, expected to affect approximately 3.2 million families, after previously reducing heating cost assistance for elderly citizens.
