Trump tariffs will batter UK economy even if Starmer strikes deal, grim new forecast warns: Live – UK Times

Goldman Sachs economists have downgraded their expectations of UK growth as Britain braces to be hit by Donald Trump’s trade tariffs.

Even if ministers secure the economic agreement they are seeking with the US, Goldman Sachs analysts said they still expect the UK’s GDP to suffer a greater hit than previously anticipated due to “larger negative spillovers” from trade tariffs levied against the European Union.

As a result, the bank now expects 0.8 per cent of UK growth this year and 1.2 per cent in 2026 – down from 0.9 and 1.3 respectively.

The bank’s chief European economist Sven Jari Stehn was quoted as saying by The Telegraph: “Even if the direct hit to GDP from lower exports to the US is modest, the overall drag on UK growth from trade fragmentation is likely to be greater.

“The larger US tariffs on other economies included in our new baseline imply a larger growth hit in the US and the Euro area, which should result in larger negative spillovers to the UK.”

The below chart tracks UK quarterly growth since late 2022, according to the Office for National Statistics:

The European Union will be ready to retaliate against US trade tariffs with strong countermeasures if needed, European Commission President Ursula von der Leyen said on Tuesday.

“Our objective is a negotiated solution. But of course, if need be, we will protect our interests, our people, and our companies,” Ms von der Leyen said in a speech in the European Parliament in Strasbourg.

“We do not necessarily want to retaliate. But if it is necessary, we have a strong plan to retaliate and we will use it.”

The impending rise in employers’ national insurance is having a “massive impact” on young people seeking work, Kemi Badenoch has said.

Supermarkets have been “shedding jobs” and hairdressers cannot afford to take on new staff, the Conservative Party leader said ahead of employer national insurance contributions rising on 6 April.

She told LBC: “The rise in the threshold for where you pay national insurance has meant that lots of people who didn’t cost as much to hire now do – that’s having a massive impact on young people.

“People who take on apprentices have stopped. So hair salons, for instance, have been one of the businesses that have screamed the most that they’re just not able to afford to take on new staff.

“And it’s affecting sectors like that, hospitality, anyone who takes on young people is going to be severely impacted. But the truth is, everybody’s impacted. The supermarkets have been shedding jobs.

“Lots of people are saying that if they’re going to afford such a high wage bill, they either have to pay level wages, stop hiring, and in some extreme cases, just stopped business altogether.”

Research from Aston Business School places the economic impact of tariffs at $1.4trn – if it escalates into a full-scale trade war.

Business secretary Jonathan Reynolds may feel the UK is uniquely placed to strike the best deal out of any nation but that doesn’t mean it will escape entirely unscathed.

Professor Jun Du, of the Aston Business School, said: “The picture for tariff measures may not be clear at the moment, but what is clear is that economies like the UK need to plan for various eventualities and start to put mitigating measures in place.

“US tariffs offer the UK a potential fortune through trade diversions, yet these gains could complicate efforts to reset UK–EU relations, amplifying economic divergence, political distrust and misalignment.”

Hopes that the UK could avoid Donald Trump’s tariffs reportedly collapsed last Thursday during a meeting in which US negotiators made clear there would be no exemption.

According to The Times, US negotiators made clear that Mr Trump wants to make a “big bang” with his expected announcement of tariffs on all of Washington’s trade partners – which the US president has billed as “liberation day”.

“They want to make a theatre of it,” one government source was quoted as saying. “They want to have the consistency of saying that they have done everything on the same day. It is a big challenge for us.”

Sir Keir Starmer’s attempts to persuade Mr Trump not to impose tariffs in a phone call on Sunday evening are also reported to have fallen flat – leaving the prospect of an economic deal weeks away.

That is despite UK ministers believing the deal is ready, following concessions which include Britain agreeing to drop plans for a digital service tax on US tech firms, the newspaper reported.

Our business and money editor Karl Matchett reports:

After yesterday’s market fall in response to the upcoming tariffs – and more relevantly, the wide-ranging uncertainty as to exactly who they are going to affect and how much – today sees London on something of a rebound.

The FTSE 100 is up about 0.6 per cent as a whole after an hour or so of trading, even with a slight drop-off from a quickfire surge at the start of the day.

Individually, more than 80 of the 100 biggest listed firms in the UK are in positive territory for the day so far from a share price perspective, with only five showing a drop of more than 0.5 per cent.

It’s notable that a couple of the biggest gainers are those who took bit hits yesterday: holidays and hotels in Easyjet (up 2.4 per cent), plus Rentokil (up 2.6 per cent), a company with a significant and growing business base Stateside.

A trade war with Donald Trump is not in Britain’s interest, Sir Keir Starmer has insisted, while also claiming that “we must have all options on the table”.

Pressed on whether he is reluctant to immediately impose retaliatory tariffs on US goods, Sir Keir told Sky News: “I’m not going to get ahead of myself, but I am talking to the sectors most impacted, and I think what they want most is a calm and collected response to this – not a knee jerk response.

“We are, of course, negotiating an economic deal, which will I hope deal and mitigate the tariffs. That’s, I think, where most people would want this to land. [I] can’t predict the future on that, but we’re working hard on it.

“I don’t think a trade war is in our interest – but of course the national interest is what I am guided by, and therefore we must have all options on the table.”

Sir Keir Starmer said it was likely that Donald Trump’s tariffs would hit the UK as he promised to “act in the national interest” in response – and vowed that “all options remain on the table”.

The prime minister told Sky News: “We’re working hard on an economic deal which we’ve made rapid progress on and I hope we can make really speedy resolutions on.

“But, look, the likelihood is there will be tariffs. Nobody welcomes that. We are obviously working with the sectors most impacted at pace on that.

“Nobody wants to see a trade war but I have to act in the national interests.”

That means that “all options remain on the table” in response, he added.

Sir Keir Starmer has acknowledged that people are feeling the “pressure” of price rises, but said that a rise in the national living wage would “affect millions of people”.

Speaking to Sky News a moment ago, the prime minister said: “I think for most people, they would say the cost of living crisis is ongoing and they feel the pressure financially. That’s why it’s so important that we make good on our pledge that people would feel better off – and the national living wage going up today by an average of £1,400 is going to affect millions of people.

“So in their pay packet, this month and obviously for months to come, they will now be getting more money in. That’s alongside the other work we’ve done – interest rates have been cut three times since we’ve had a Labour government, so anybody with a mortgage knows that the rates are coming down.

“And of course, on average, wages are going up now more quickly than prices – so I acknowledge that with bills coming in people see that rise, and that is a pressure.”

Sir Keir Starmer’s business secretary insisted that living standards are improving but acknowledged that rising bills mean people will not immediately feel a change.

“For the first time in a long time, living standards are increasing and wages are rising faster than inflation. That doesn’t mean people immediately feel that because of some of these pressures. I accept that,” Jonathan Reynolds told BBC Radio 4’s Today programme.

He pointed to the rise in the national living wage coming into effect on Tuesday as well as the freeze to fuel duty and keeping the triple lock for pensioners as moves to mitigate cost-of-living pressures.

He told LBC: “Wages are rising faster than inflation. That’s the measure [of] whether people are really better off. And of course, when other bills are rising, you’ve got to spend that money on those things. I know it feels like that.

“But we are, after a period, unprecedented period, where living standards stagnated in the UK, are beginning to see that change and turnaround.”