Global tariff tensions could hit UK hard, BoE warns

The Bank of England (BoE) warned on Wednesday that risks to the global economy and financial markets have intensified following US President Donald Trump’s import tariffs, with the UK particularly exposed due to its large financial sector and open economy.

In a summary of its latest Financial Policy Committee (FPC) meeting, the BoE, cited by Reuters, said the likelihood and severity of adverse economic events had increased.

The committee highlighted concerns over global debt levels and warned that a major shift in global trade could undermine financial stability by weakening growth.

British government bond yields surged, mirroring sharp moves in US Treasuries, as investors reacted to the tariffs. Long-dated UK yields hit their highest levels since 1998.

The FPC also flagged vulnerabilities in private equity and leveraged trading strategies and reiterated concerns about reduced global co-operation weakening the resilience of the financial system.

Despite mounting risks, the FPC expressed confidence in the UK banking sector’s ability to support households and businesses even under severe stress. It maintained the countercyclical capital buffer at 2 per cent.

The BoE last revised down its 2025 growth forecast to 0.75 per cent, below the UK government’s 1 per cent projection. However, fears are mounting that Trump’s tariffs could trigger a sharper economic slowdown.

Attribution: Reuters
Subediting: M. S. Salama