US reciprocal tariffs could cut British economic growth by 1%, OBR says

US President Donald Trump's threats to impose new reciprocal tariff rates next week on countries around the world could cut British economic growth by up to 1%, according to the government's independent fiscal watchdog.

The Office for Budget Responsibility (OBR) said in a scenario where the United States imposed a reciprocal 20 percentage point increase in tariffs on all trade partners, Britain's economic growth would be 1% lower than its central forecast in the peak year of impact in 2026-27.

The OBR said if that happened it would wipe out almost all of the government's fiscal buffer "as additional tariff revenue is more than offset by lower receipts from income, corporation, and consumption taxes".


Trump has called the proposed new tariffs a "Liberation Day" for the U.S. economy. The action aims to shrink a $1.2 trillion global goods trade deficit by raising U.S. tariffs to levels charged by other countries and counteracting their non-tariff trade barriers.

The British government is seeking to avoid the reciprocal tariffs by negotiating a new economic deal with the United States.

Prime Minister Keir Starmer spoke to Trump this week and the business minister Jonathan Reynolds visited Washington earlier this month in the hope of securing a deal that would spare Britain the impact of the tariffs.

The British economy is relatively trade-intensive compared with other economies in the G20 and so would be disproportionately impacted by a global trade war.

In the scenario where the United States imposes reciprocal tariffs on all trade partners, inflation would be 0.6% higher in the next fiscal year as the price of British imports of U.S. good would increase.

Trump's whirlwind tariff offensive since his January inauguration has been marked by threats, reversals and delays, sometimes within hours of imposition deadlines, as his trade team formulates policy.