Trump's Tariff Threats Loom Over British Economy

President Donald Trump's proposed tariffs could shrink the British economy by up to 1% according to the OBR. While aimed to reduce the U.S. trade deficit, these tariffs pose a threat to U.K.'s fiscal stability. Negotiations are underway to prevent these economic repercussions.

U.S. President Donald Trump has issued a new tariff ultimatum, threatening countries with increased rates come next week. The proposed measures, which could cut the British economy by up to 1%, have been detailed in a report by the Office for Budget Responsibility (OBR).

In their analysis, the OBR concluded that these tariffs might effectively eliminate the U.K.'s fiscal buffer. As increased costs of imported goods translate to decreased demand for British exports, the economic ramifications could be extensive. Trump has dubbed the tariff increase a 'Liberation Day' for the U.S. economy, aiming to reduce a $1.2 trillion trade deficit.

British Prime Minister Keir Starmer has initiated talks with Trump, while Business Minister Jonathan Reynolds has visited Washington to negotiate a deal to avoid retaliatory tariffs. Adjusting the digital services tax is one strategy under consideration to secure favorable terms with the U.S.

(With inputs from agencies.)