The U.K. economy faces fresh headwinds following the imposition of new tariffs by U.S. President Donald Trump. Under the newly announced measures, the United States will apply a 10% tariff on all British goods, and a 25% tariff specifically targeting British steel, aluminum, and automobiles.
Economists warn that the tariffs are already having a chilling effect on the U.K.’s economic outlook. Forecasts for GDP growth in 2025 have been downgraded from 1% to 0.8%, reflecting the expected decline in exports and rising costs for British manufacturers.
The tariffs are not only likely to suppress business investment but also to fuel inflation. With import costs rising and businesses facing increased operational expenses, inflation is now projected to exceed 3% — a level not seen since the early 2020s. Households may feel the pinch through higher prices for goods and services, at a time when wage growth remains sluggish.
The labor market, which had shown signs of resilience post-Brexit, is also expected to suffer. Unemployment could rise to nearly 5% as export-oriented industries, particularly manufacturing and automotive sectors, are forced to cut jobs or scale back operations.
British officials have condemned the move, calling it "unfair and damaging to longstanding economic ties." Diplomatic efforts are underway to seek exemptions or to negotiate a more favorable trade framework, but analysts caution that any resolution is unlikely to come quickly.
Meanwhile, business groups such as the Confederation of British Industry (CBI) and Make UK have urged the government to increase domestic support for affected industries, including subsidies, tax relief, and efforts to diversify export markets beyond the U.S.
The tariffs come at a time when the global economy is already grappling with slowing growth and lingering supply chain disruptions, amplifying concerns about a potential recession both in the U.K. and worldwide.
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