The United States has recently imposed new tariffs on imports from Mexico and Canada, while also doubling the existing levies on Chinese goods. These actions, taken by President Donald Trump, have raised alarms among experts at the Bank of England, who warn that the tariffs could significantly impact UK consumers. The potential fragmentation of supply chains and the need for their reordering could lead to decreased growth and increased inflation in the UK.
Bank of England Governor Andrew Bailey has emphasized the potential global repercussions of these tariffs, describing them as a "very damaging thing for the world." He strongly advocates for resolving trade disputes through international institutions like the World Trade Organization, rather than through unilateral actions. Bailey underscored the importance of trade and openness in supporting growth and spreading innovation and ideas.
"Trade supports growth. Openness supports the spread of innovation and ideas."
— Andrew Bailey
There is considerable uncertainty regarding the future scope of President Trump's tariff policies and how they will affect international relations. According to Megan Greene, a member of the Bank's monetary policy committee, this uncertainty presents a "tonne of uncertainty" about the economic implications for the UK and beyond. Should tariffs be imposed on UK goods entering the US, UK firms may find it increasingly difficult to sell to American consumers, thus exerting downward pressure on the UK economy.
The potential for the US to withdraw from institutions like the International Monetary Fund and the World Bank further compounds these risks, threatening global economic stability. Professor Alan Taylor noted that trade barriers can be detrimental both domestically and globally.
"If you put sand in those wheels [of trade] we're going to be worse off on some margin."
— Professor Alan Taylor
The new US Treasury Secretary, Scott Bessent, however, is said to support multilateralism, advocating for collectively coordinated action. This approach could provide a pathway to mitigating some of the adverse effects of these tariffs. Nonetheless, the exact trajectory remains uncertain as countries weigh their responses to these US trade policies.