The UK economy will be hit with slower gross domestic product (GDP) growth thanks to Donald Trump’s swinging tariffs – even if Britain is exempt, Rachel Reeves has warned.
Her comments came as Trump's new 25 per cent tariffs on Mexico and Canada took effect, with both countries vowing to retaliate.
The Chancellor said a global trade war triggered by the US President would lead to higher inflation and slower economic growth.
She said: "I don’t want to see tariffs increased. Even if tariffs are not applied to the UK, we will be affected by slowing global trade, by a slower GDP growth and by higher inflation than would otherwise be the case."
Chancellor Rachel Reeves
PAAs well as the 25 per cent tariff, the US President has also doubled tariffs on China from 10 per cent to 20 per cent, prompting Beijing to respond with duties of up to 15 per cent on some American exports.
Global markets tumbled yesterday amid trade conflict fears, with the S&P 500 recording its biggest daily loss since December 2025 (-1.8 per cent ) and the FTSE 100 falling 0.6 per cent (50.8 points) to 8,820.5 in early Tuesday trading.
Economists predict slower growth and higher inflation than projected in the October Budget, putting the Chancellor’s fiscal targets at risk. In response, the Treasury is considering public spending cuts to restore financial headroom within its own fiscal rules.
The Bank of England has warned that the UK will feel the effects of escalating trade tensions. In its February economic outlook, it cautioned that global growth could suffer if Trump proceeds with higher tariffs, while inflation remains uncertain.
Global markets tumbled in response to the escalating trade tensions, with Wall Street indices wiping out gains seen since Trump's election victory
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Speaking yesterday, Reeves reaffirmed her support for free and open trade, warning that higher tariffs benefit no one.
She said: "I don't want to see tariffs increase. I don't think it serves anyone well. I will continue to make the case with all my international counterparts for free and open trade."
Her comments came as global markets tumbled in response to the escalating trade tensions, with Wall Street indices wiping out gains seen since Trump's election victory.
During a visit to Washington last week, Prime Minister Sir Keir Starmer and Trump confirmed that the US and UK are in talks over a bilateral trade deal. However, Reeves cautioned against over-optimism, stating she was "not naive" about the challenges ahead.
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Experts are warning the UK economy could take a hit GETTY She said: "This is not going to be an easy thing to secure for reasons that we all understand.
"There will have to be give and take on both sides. We absolutely recognise that, but I do think there’s a big opportunity here."
Reeves went on to highlight the importance of US-UK ties following Trump’s decision to suspend military aid to Ukraine, reaffirming that the two nations remain "closely intertwined" on security.
She added: "They are our closest partners when it comes to defence and security, and that will continue to be the case."
