Trump tariffs threaten global growth and raise risk of shocks, says Bank

Donald Trump's sweeping tariffs have put global growth at risk, the Bank of England has warned, heaping pressure on government finances and increasing the likelihood of "severe shocks" to the financial system.

- Kalyeena Makortoff

The Bank's financial policy committee (FPC) said its global risk environment had deteriorated and "uncertainty had intensified" since its last update in November, with US tariff announcements contributing to a "material increase in risks to global growth" and inflation levels.

It said those concerns had knocked investor confidence, and increased the risk of a "further sharp correction" in financial markets that could cause stress for indebted companies and make it harder for governments to borrow money and refinance their debts.

The Bank warned that higher government bond yields - in effect the interest rate countries pay on their debt - would "reduce their capacity to respond to future shocks".

Government bonds, including traditionally safe haven US treasuries, have been undergoing a sell-off since Trump announced his 10% tariffs on all imports to the US over the weekend.

That accelerated last night after Trump announced a fresh wave of tariffs before later announcing a 90-day pause for dozens of countries except China, for which he increased the tariff rate from 104% to 125%.

The FPC said that a big shift in the nature and predictability of global trade could also reduce the likelihood of international cooperation, particularly in tackling global challenges and shocks, "which could reduce resilience of the financial systems".

Overall, "severe shocks are more likely", the committee warned.

High geopolitical tensions would also have implications outside global trade, the FPC said, creating a heightened risk of cyber-attacks that could amplify other stresses and disrupt payments and financial services to UK households and businesses.

It said that since its last meeting in mid-November "global trade policy uncertainty had intensified and some risks had crystallised.