The British government made economic growth faster the first task. But the effort to start the startup is due to the repeated phase-out of the global economy trapped from crisis to crisis.
British officials appeared to have won on Thursday. The country will announce some form of trade agreement with the United States to mitigate the impact of the recent increase in U.S. tariffs.
President Trump said on social media on Thursday that the deal with the UK “is a full and comprehensive agreement that will consolidate relations between the United States and the United Kingdom for years to come.”
British officials have negotiated in Washington for months as they try to isolate their country from Mr. Trump’s desire to reshape the global trade order. They also want to protect an economy that barely avoided a recession late last year and have had a relatively strong recovery later this year.
But officials failed to get exemptions when Britain was attacked for 10% of the “basic line” tariffs imposed by Trump on U.S. trading partners.
The UK also imposes a 25% tariff on cars and steel, and its leaders fear threatening tariffs on pharmaceuticals and movies, two important exports. Like other countries, forecasts for UK economic growth have been cut due to trade uncertainty.
Expected deals with the United States will be welcome in the UK for a number of reasons. Prime Minister Keir Starmer has made a presentation to the president (including an invitation to King Charles for a state visit), which is likely to prove and may have masked setbacks in the local elections last week.
It can also support certain sectors, including the UK's automotive industry, which is the biggest risk of high tariffs. Cars account for about 10% of the value of British goods exported to the United States. Many are luxury cars like Jaguars, Aston Martins and Bentley, which are tailor-made in the UK. These automakers found that it was economically difficult to transfer production to the United States and stop the goods there.
Trade agreements may also cancel consumer and business sentiment, which have all collapsed recently.
However, it will limit it to occupy the overall British economy. Although the United States is an important trading partner, trade flows are largely biased towards services, which are not affected by higher tariffs. Last year, the UK exported £137 billion in services to the United States.
More than 60% of businesses report that they expect U.S. tariffs won’t have an impact next month, according to a recent survey by the National Bureau of Statistics.
Although the UK and the United States have been in trade negotiations for five years, the current deal is unlikely to be a full-fledged free trade agreement that reduces tariffs on a wide range of goods and increases opportunities for many services, such as the Convention UK and India signed this week. For the UK, the bigger award will be a close relationship with the EU, which represents half of UK trade. Some progress is expected at the summit in the UK later this month.
Trade uncertainty is also on the weight of the Bank of England, which cut interest rates by a quarter to 4.25% on Thursday.
UK policymakers have been cautious in lowering interest rates since last year as concerns over price pressure and short-term bumps in inflation this year are expected. But some have recently highlighted the risks of trade uncertainty from economic growth, which is expected to undercut business investment and consumer spending. Overall, policy makers have differentiated on this decision. Five members, most of them voted for the layoffs. The two voted to hold, and the two voted for the bigger cuts.
Economists say the greater threat to the UK is the uncertainty created by Mr. Trump’s trade policy on a global scale, rather than tariffs on the UK.
Britain is vulnerable to external shocks, and its economy will suffer if others, such as the EU and the United States, fall into recession.
“The center of the UK story is not tariffs; it is a domestic factor,” said Benjamin Caswell, an economist at the National Institute of Economics and Social Studies. It lowered its forecast for UK economic growth to 1.2% this year, forecasting weak business confidence and higher costs. Businesses also face higher payroll taxes, which went into effect last month, could drive inflation.
The sluggish outlook means the government may face the face of raising taxes or cutting public spending this year.
“The tariffs create a lot of uncertainty, but I think it should get the government out of the situation,” Caswell said.
