Impact of Trump's Tariff Plan on UK Economy

LONDON (Reuters) – A leading British think tank warned that the UK's already slow economic growth rate could be more than halved if Donald Trump wins the U.S. presidential election and imposes sweeping import tariffs.

In its latest report, the National Institute of Economic and Social Research (NIESR) outlined a grim outlook for Britain's economy in the coming years. The report predicts growth will slow to 1.1% in 2026, down from 1.2% next year, and only reach 1.7% by 2030.

According to Ahmet Kaya, a principal economist at NIESR, the UK could see economic growth drop to merely 0.4% next year if the U.S. adopts the tariffs Trump plans to implement.

Kaya stated that the global economy would also face challenges if Trump proceeds with 60% tariffs on Chinese imports and 10% on other imports.

He emphasized that "relative stability is under serious threat by the potential raising of import tariffs in the United States," during the presentation of NIESR's forecasts.

The Bank of England may need to increase interest rates to combat rising prices triggered by American tariffs. However, inflation could still rise by 2 to 3 percentage points over two years.

This increase in borrowing costs could significantly hinder the new UK government's strategy to utilize more borrowing along with tax increases to fund higher spending.

Trump, currently facing Democratic Vice President Kamala Harris in a tightly contested race for the White House, has praised tariffs as "the most beautiful word in the world," claiming that his plan would enhance U.S. manufacturing, jobs, and earnings while generating trillions in federal revenue over the next decade.

Weak economic growth in the UK would present a challenge for Prime Minister Keir Starmer, who has pledged to make the economy the fastest-growing in the Group of Seven.

Lastly, NIESR has indicated that a rise in employer-paid social security contributions—the largest tax increase in the recent budget plan—would likely lead to a slight increase in unemployment over the next five years.