Overview

• US President Donald Trump’s sweeping tariffs, including a baseline 10% on imports and 25% on cars, steel, and aluminum, are directly impacting UK exports, which rely on the US for 16% of goods trade.
• EY Item Club has slashed UK GDP growth forecasts to 0.8% for 2025 and 0.9% for 2026, down from earlier projections of 1% and 1.6%, respectively, citing weakened consumer and business confidence.
• Key sectors like car manufacturing and pharmaceuticals are particularly vulnerable due to high US tariff exposure and reliance on American markets.
• Chancellor Rachel Reeves faces pressure to maintain her £9.9 billion fiscal headroom, with potential tax increases being considered to offset tariff-related revenue losses.
• The Bank of England is expected to gradually reduce interest rates to 3.75% by the end of 2025, aiming to support spending and investment in a challenging economic environment.