Speaking before MPs, Governor Andrew Bailey described the risks to the UK and global economies as “substantial” and warned that any disruption to trade flows could reduce output and raise costs.
Megan Greene, a member of the Bank’s monetary policy committee, highlighted the uncertainty surrounding the extent of Washington’s protectionist measures and how other nations might respond. She noted that tariffs on British exports to the US would exert “downward pressure” on UK growth but also potentially dampen inflation. On the other hand, the higher costs associated with fragmenting supply chains could weigh on the UK economy while fuelling price rises.
Professor Alan Taylor, another committee member, agreed that the balance of risk is heavily tilted to the downside. “If you put sand in those wheels of trade, we’re going to be worse off on some margin,” he said. Bailey echoed these concerns, stressing that open trade fosters innovation and growth, and urged the settlement of disputes through established institutions like the World Trade Organization.
Trump administration officials argue that tariffs help secure better deals for the US. However, critics say such policies inflate consumer prices at home while threatening economic vitality elsewhere.
Meanwhile, Bailey warned of further upheaval if the US withdraws from bodies such as the International Monetary Fund or the World Bank, calling the idea “very damaging for the world.” The newly appointed US treasury secretary, Scott Bessent, has expressed support for multilateral cooperation, a stance Bailey said he “strongly” welcomes.
Jamie Young
Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the 'covid era' and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine's coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk
