UK must take impact of trade wars ‘very seriously’, says Bank governor

The Governor of the Bank of England has said the UK must take the risk that trade wars will hit global economic growth “very seriously”.

Andrew Bailey told an Institute of International Finance event in Washington that the central bank is currently “working through” the implications of US President Donald Trump’s tariff plans ahead of the Bank of England’s next rate-setting meeting in May.

It comes after the International Monetary Fund (IMF) warned earlier this week that global trade disruption and unprecedented uncertainty linked to US tariffs are set to slow growth significantly in economies around the world this year.

The organisation said it is slashing its global growth forecast by 0.5 percentage points this year, with nearly all countries seeing a downgrade.

It said the UK economy is predicted to grow by 1.1% this year, 0.5 percentage points less than January’s forecast.

On Wednesday, in response to a question about US tariff policy, Mr Bailey said: “We do have to take very seriously the risk to growth.

“Trade does support growth. Fragmenting the world economy will be bad for growth.

“The UK’s a very open economy and therefore it’s not just the relationship between the US and the UK, it’s the relationship between the US, the UK and the rest of the world that matters here.

“When we do our modelling, we also have to take into consideration the effect of growth in the rest of the world.”

Mr Bailey also suggested that “weak productivity growth” has put pressure on economic growth in the UK since the financial crisis.

The comments came as Chancellor Rachel Reeves insisted the US is “keen to do a deal with the UK” ahead of talks with her American counterpart in Washington.