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UK economy risks big hit under Trump tariffs plan, think tank says

LONDON (Reuters) – A leading British think tank said on Wednesday that the country’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 painted a bleak picture for Britain’s economy over the coming years – even without Trump’s tariff plan – with growth seen slowing to 1.1% in 2026 from 1.2% next year and only reaching a lacklustre 1.7% in 2030.

But the country, which is sensitive to changes in global trade flows, could post economic growth of just 0.4% next year if the U.S. implements tariffs like those Trump has promised, said Ahmet Kaya, principal economist at NIESR.

The world economy would also suffer if Trump imposes tariffs of 60% on Chinese imports and 10% on imports from everywhere else, he said.

“Relative stability is under serious threat by the potential raising of import tariffs in the United States,” Kaya said during a presentation of NIESR’s latest forecasts.

The Bank of England would probably have to raise interest rates to counter a rise in prices caused by higher U.S. tariffs but inflation would still probably rise by between 2 and 3 percentage points over two years, he said.

That kind of increase in borrowing costs would deal a major blow to the plans of the new UK government to use more borrowing in addition to tax rises to fund increased spending.

Trump, who is in a tight race for the White House against Democratic Vice President Kamala Harris, has described tariffs as “the most beautiful word in the world” and says his plan would boost U.S. manufacturing, jobs and incomes and earn trillions of dollars in federal revenues over 10 years.

Feeble British growth would be a setback for Prime Minister Keir Starmer, who has promised voters he will turn the economy into the fastest-growing in the Group of Seven.

A rise in social security contributions paid by employers – the biggest tax rise in the government’s budget plan announced last week – would lead to a small rise in unemployment over the next five years, NIESR said.

This post appeared first on investing.com

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