US Tariffs – How will they affect the UK?
- TBA
- May 21
- 4 min read
Updated: May 29
The US administration recently announced a plan targeting more than 20 economies with the largest trade deficits with the US, claiming unfair trade practices are harming American interests.
In addition, the US plans to impose a 10% baseline tariff on nearly all imports from around 180 countries and regions — including the UK.
What’s really going on, and more importantly, how will it impact everyday life in the UK?
US Tariffs may cut UK economic growth by 2%
Although the US has only imposed the lowest 10% tariff on UK exports, this trade barrier is still expected to significantly impact the British economy. Several leading think tanks estimate that this policy could shave up to 2 percentage points off the UK's annual GDP growth.
UK Prime Minister Keir Starmer stated that the government is actively exploring countermeasures, prioritising an accelerated UK-US trade agreement negotiation to offset the economic hit.
Interestingly, on April 3, the UK’s Department for Business and Trade released a 417-page document listing over 11,000 US products — many of which may become targets for retaliatory tariffs. This move was widely seen as a strong signal to Washington.
Insiders revealed that officials at 10 Downing Street were somewhat relieved that the UK only received the minimum 10% tariff — especially when compared to the 20% punitive tariffs slapped on EU countries. This differential treatment is seen as a relative advantage for Britain.
GBP surge shocks international students
Markets reacted fast — within 24 hours, the British Pound surged. International students in the UK definitely felt this during tuition payments — GBP to CNY jumped to 9.41, a post-Brexit high.
The pound’s exchange rate against both CNY and USD hit multi-year highs, while UK 30-year government bond yields spiked to 5.19%, the highest since the 1998 Asian Financial Crisis — raising alarm bells in fiscal circles.
Government debt burden set to grow
Each 1% rise in bond yields adds roughly £18 billion in annual debt interest. Chancellor Rachel Reeves now faces a fiscal double whammy: shrinking tax revenues from a slowing economy and rising borrowing costs. Budget revisions in the autumn may become inevitable.
How is the government responding?
1. Diplomatic policy
The UK has launched a multi-pronged response. PM Starmer is reportedly opening hotline talks with global allies such as Australia's PM Anthony Albanese and Italy’s PM Giorgia Meloni.
Goals of this diplomatic blitz include:
Establishing a real-time economic intelligence network
Building a joint protective buffer to reduce the global economic fallout of US tariffs
2. Economic policy
A recent Deutsche Bank report warned that Trump’s tariff move could cost 50,000 to 100,000 UK jobs, shrinking GDP by 0.3% to 0.6% — or up to 6 per 1,000 of total output.
To fight back, the UK government is planning a three-pronged strategy:
Launch an economic reform plan to restructure industries and streamline investments
Eliminate invisible roadblocks like red tape and monopolies that hinder business growth
Accelerate infrastructure rollout, especially for high-speed rail and green energy projects
The aim? Push for a ‘speed-up’ amidst a turbulent global economy.
3. How will the tariffs impact everyday Brits?
US tariffs are already rippling through UK households, affecting everything from supermarket prices to interest rates. Here are 5 key areas where you'll likely feel the changes:
Higher Living Costs
Products imported from the US such as steak, cherries, and other foods — may get pricier. If the UK retaliates with tariffs, these items will take the first hit. On the flip side, supermarkets may boost promotions for French cheese and Spanish ham as alternatives.
Investment Market Volatility
Many Brits noticed their retirement funds and investment portfolios took a hit due to drops in US stocks. Experts urge calm — don’t panic sell. Think of long-term investing like slow-cooking a stew — patience is key.
Job Market Turbulence
Industries that heavily export to the US, like car manufacturing, may face setbacks. US consumers might shift to domestic products, forcing UK exporters to cut costs — possibly jobs. Still, there’s a silver lining: innovation pressure could spur new tech and green job creation.
Energy Price Spikes
Natural gas for cooking or petrol for cars may soon feel more expensive.
One-third of the UK’s LNG comes from the US If exports fall due to domestic US demand, UK households could face rising energy bills. Time to check your home insulation!
Interest Rate Uncertainty
The Bank of England may pause planned rate cuts. Base interest rates (currently 4.5%) could remain high — bad news for first-time homebuyers, as monthly repayments could jump. On the bright side? Savings accounts are paying more now.
Final Thoughts
Yes, economic changes are happening fast — but there’s no need to panic. Keep up with the news, plan your finances wisely, and if needed, consult a tax advisor to help with your financial planning.
Remember – economic uncertainty is like British weather — unpredictable, but if you stay prepared, the sun always returns.
For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information.
Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation.
