Trade tariffs could derail fragile economic growth

Rachel Reeves has enjoyed a welcome boost by optimistic new growth figures, but has been warned that threatened tariffs from Donald Trump could damage the UK economy.

- KATE DEVLIN

Economists at the National Institute of Economic and Social Research (Niesr) said Britain could become the third fastest growing country in the G7 this year - but the economy would be knocked if there was a trade dispute with the divisive US president.

Niesr said it was projecting that the UK economy would grow by 1.5 per cent this year, lifting its previous forecast of 1.2 per cent, which is mostly driven by the spending programme announced by the chancellor in the October Budget.

However, economists at the top think tank warned that GDP growth was likely to be 0.2 percentage points lower in the first year of tariffs if they were implemented by president Trump.

Extra costs on goods entering the US could also fuel inflation and delay interest rate cuts, affecting mortgages, Niesr warned.

The revelation increases pressure on Sir Keir Starmer to secure a carve out for the UK after president Trump said he could exempt Australia from punishing tariffs on steel.

The US president triggered panic over the future of Britain's fragile industry on Monday when he announced a worldwide 25 per cent tariff on steel imports.

Mr Trump has hailed his planned steel tariffs, claiming they are "the beginning of making America rich again".

But he also announced yesterday he would give "great consideration" to handing Australia a carve-out because of a trade surplus.