US tariffs could hit UK consumers, Bank experts warn

Experts at the Bank of England have warned that U.S. President Donald Trump's tariff policies could lead to a reduction in disposable income for British consumers. Bank of England Governor Andrew Bailey stated that tariffs could hit economic growth and pose a "significant" risk to the UK and global economies. His colleagues added that trade frictions could harm businesses in the UK and other countries, potentially hindering international commerce.

Bailey called for trade disputes to be resolved through global avenues and emphasized the importance of trade. The United States has been escalating trade tensions, imposing new tariffs this week on imported goods from Mexico and Canada, and doubling tariffs recently imposed on Chinese goods. Speaking to lawmakers about the impact of Trump's tariffs, Bailey said, "The risks to the UK economy, and indeed the world economy, from tariffs are significant." When asked if Trump's tariffs meant a reduction in disposable income for British consumers, Bailey replied, "Yes. We serve the people, and we have to take this very seriously."

Megan Greene, a member of the Bank of England's Monetary Policy Committee, said there is uncertainty about the U.S.'s determination in implementing tariffs and how other countries will respond. She noted that tariffs could affect the UK economy in several ways. If tariffs are imposed on British goods entering the U.S., this would "put downward pressure on the UK economy" because businesses would find it more difficult to sell goods to American consumers. However, it could also lower inflation, which is the rate at which prices rise.

Greene added that if supply chains break down and need to be readjusted, this would hit UK economic growth and drive up inflation. "Ultimately, tariffs depress economic growth," she said, adding that there is a "huge amount of uncertainty" about how Trump's tariffs will play out, but the negative impacts are likely to outweigh the positive ones for UK economic activity. Professor Alan Taylor, also a member of the Monetary Policy Committee, agreed that the risks of tariffs to the economy outweigh the benefits, "and that's true for people across the country and across the world." He added, "If you put sand in the wheels of trade, we are all going to be worse off to some extent."

Bailey said he "very strongly" agreed with the assessment of the committee members. "Trade supports growth. Openness supports innovation and the spread of ideas," he said. Bailey called for trade disputes to be resolved through the World Trade Organization, rather than through arguments between the U.S. and other countries. Trump and his administration have stated that imposing higher tariffs on goods imported into the U.S. will help it reach better deals with allies and competitors around the world. However, experts have warned that trade barriers could harm the U.S., triggering higher prices and more inflation, and hitting economies around the world.

Furthermore, Bailey also warned of the risks if the U.S. were to withdraw from institutions such as the International Monetary Fund (IMF) and the World Bank, which provide loans to countries to try to avert financial crises. Some of Trump's allies, including key White House staff, have previously suggested such a withdrawal. Bailey said such a move would be "a very damaging thing for the world." However, he said he "strongly" welcomed news that the new U.S. Treasury Secretary, Scott Bessent, "believes in multilateralism" or collective coordinated action.