# Trump’s trade war could pose ‘substantial’ threat to UK economy, says Bank

## Main Content

A full-blown trade war would pose a “substantial” threat to the British economy, Bank of England governor Andrew Bailey has warned.

Donald Trump struck Canadian and Mexican imports with new duties of 25% at midnight on Tuesday, and also levied extra 20% tariffs against Chinese goods, triggering retaliatory moves. He also threatened to place sweeping 25% tariffs on EU imports last week.

Speaking to MPs on the Treasury select committee, Bailey said that a US-led attack on trade with the UK and other countries posed a big risk to the economy. He agreed with MPs that this could mean, in practical terms, that people in Britain would have less money in their pockets.

“It really is a big episode,” in terms of economic history, he added. “We have to take it very seriously. We have to address it.”

During Keir Starmer’s visit to Washington last week, Trump indicated a trade deal with the UK “where the tariffs wouldn’t be necessary”, was increasingly likely.

However, it is unclear what impact tit-for-tat tariffs between the world’s biggest economies could have on UK inflation.

Countries could divert goods to the UK if fresh US tariffs made importing their wares uncompetitive there. This could make some goods on the global market cheaper, by stripping out US demand.

Still, a harsh and fast-paced bargaining approach from the Trump administration made it hard to determine what the wider economic fallout would be, rate-setters at the Bank told MPs.

Soon after the new trade barriers came into force, a senior US official suggested that the tariffs could be watered down.

Trump was considering giving “relief” to “sections of the market”, Howard Lutnick, the US commerce secretary, said on Wednesday. This could include cars, he suggested.



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