The Governor of the Bank of England, Andrew Bailey, has raised concerns over the potential impact of recent US trade policies on the UK and global economies. Speaking to the Treasury Select Committee on Wednesday, Bailey described the risks posed by President Donald Trump’s aggressive tariff measures as “substantial.”
US Tariffs and Global Implications
President Trump recently imposed a 25% tariff on imports from Canada and Mexico, claiming that such measures would strengthen the US’s negotiating position with allies and rivals. However, experts have warned that these trade barriers could have far-reaching consequences, including higher prices, increased inflation, and economic slowdowns in affected countries, including the UK.
Bailey emphasized the importance of trade in supporting economic growth, stating, “The risks to the UK economy and the world economy are substantial.” When asked if US trade policies could reduce disposable income for UK citizens, he confirmed, “Yes, that’s right… We serve the people, and we have to take it very seriously.”
Economic Forecasts and Inflation Concerns
Economists have predicted that the tariffs could lead to higher inflation in the US, prompting increased interest rates. The National Institute of Economic and Social Research (NIESR) has also forecasted slower economic growth in the UK as a result of rising global interest rates.
Concerns Over US Withdrawal from Global Institutions
Bailey also expressed concerns about the possibility of the US disengaging from international financial institutions like the International Monetary Fund (IMF) and the World Bank. These organizations play a critical role in managing the global economy and providing financial support to countries in crisis. A US withdrawal, Bailey warned, would be “very damaging” to global economic stability.
Despite these concerns, Bailey noted a positive development with the appointment of US Treasury Secretary Scott Bessent, who has expressed support for multilateralism. “I strongly welcome that,” Bailey added.
Looking Ahead
As the UK navigates the potential fallout from US trade policies, Bailey’s remarks underscore the importance of maintaining open trade and international cooperation. The Bank of England will continue to monitor the situation closely, emphasizing the need for a balanced approach to global economic challenges.
