Donald Trump's tariffs look set to "knock out" the Labour Chancellor's fiscal buffer - less than one week after Rachel Reeves boasted a headroom of almost £10billion.
After making crippling cuts to Britain's ballooning benefit system to boost the economy, the Chancellor is now preparing for the US President to impose his much-awaited tariffs.
Trump will announce a wave of trade taxes across the world tonight - as economic markets quiver in the face of their potential impact.
It has been claimed that the tariffs will be around 20 per cent on swathes of the £2.3trillion of imports each year.
After making crippling cuts to Britain's ballooning benefit system, she must prepare for the US President to impose his much-awaited tariffs
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Experts have warned that the speculated tariffs could even eliminate the headroom that Reeves boasted in her Spring Statement last Wednesday.
The Office for Budget Responsibility's (OBR) Professor David Miles told MPs: "If tariffs at 20, 25 per cent were put on the UK and maintained for five years, our assessment of what that does is that it will knock out all the headroom that the Government currently has."
Ahead of Trump's so-called "Liberation Day", Treasury officials attempted to establish a trade deal to protect British businesses.
Sir Keir Starmer went so far as to invite the second-term President to the UK in June in a last-minute bid to sign a new limited trade deal that would dodge new export taxes.
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The tariffs come after weeks of Trump and Vice President JD Vance have accused Europe of "free-loading" off of America "for decades".
Speaking to journalists at the White House, the US President hit out at the continent's leaders over spending in Ukraine last week, asking why "they are in for $100billion, and we're in for $350billion".
Now, White House press secretary Karoline Leavitt declared that the "historic" taxes signal "the days of America being ripped off are over".
She said: "He is with his trade and tariff team right now, perfecting it to make sure this is a perfect deal for the American people and the American worker."
Now, White House press secretary Karoline Leavitt declared that the "historic" taxes signal "the days of America being ripped off are over"
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Bloomberg Economics has revealed that 1.3 per cent of UK GDP could be at risk if tariffs were to be raised by 35 per cent - demolishing the UK's public finances.
Britain could still suffer a 70 per cent decrease in US exports, hitting GDP by 1.1 per cent.
As a result, the Chancellor might be forced into increasing taxes or expand spending cuts to compensate for the potential damage inflicted upon the economy.
So far, Labour has not responded with any retaliatory tariffs as of yet, although Trump's other targets - such as Canada - have keenly hit back.
