Fears of a global recession are mounting as tensions escalate in the ongoing trade war. As of Wednesday evening, the conflict is primarily between the US and China, who continue to impose higher tariffs on each other’s goods.
Meanwhile, President Donald Trump has temporarily halted additional tariffs on imports from most other countries for 90 days. For now, these nations—including the UK—will face a lower tariff rate of 10%, the same rate announced for the UK last week. Compared to other economies, Britain appears to have avoided the worst of the fallout.
Still, British exporters are not in the clear. Goods sold to the US will carry extra charges, and the wider UK economy may feel the effects through slower growth and rising inflation. While the overall impact is still unclear, there could be some unintended benefits amid the disruption.
The businesses most directly affected are UK exporters—from car manufacturers to food producers—who sell goods to the US. With American buyers now paying 10% more, these companies must decide whether to absorb the cost, pass it along the supply chain, or hope customers will accept higher prices. These tariffs could lead to falling sales, job cuts, and delayed investments. Other UK companies might also be impacted by a surge in cheaper imports redirected from other countries, particularly from China, which accounts for a third of the world’s goods production.
Because of how interconnected global supply chains are, UK firms may feel the ripple effects of tariffs imposed elsewhere too.
That said, the UK might escape the worst economic slowdown due to the nature of its exports. Two-thirds of UK exports to the US are services—such as finance, insurance, and advertising—which aren’t subject to tariffs. This focus on services is a trade advantage for Britain.
However, it’s not without risk. Some services are closely tied to goods—like customer support or product marketing—and could see reduced demand if tariffs hurt US sales. In general, service exports may decline if global demand drops. For instance, the advertising industry is already concerned, as marketing budgets are often cut first during economic downturns.
The UK’s strength in services could become a weakness. According to the Bank of England, the size of the UK’s export sector and its large financial industry make it vulnerable to financial instability from slowing global growth.
Chancellor Rachel Reeves has warned that UK economic growth is likely to slow, even though the UK now faces the same 10% tariffs as others. This slowdown not only affects families and businesses but could also strain public finances. If growth lags, the Chancellor may be forced to raise taxes in the Autumn Budget to stay within fiscal limits.
Adding to the challenge are fluctuations in the bond market. Traditionally seen as a safe haven, bonds have seen significant sell-offs, potentially increasing borrowing costs for governments.
Stock markets around the world have also been extremely volatile, stoked by fears of a recession. In the UK, falling share prices have hit investment products like ISAs and pensions. But financial experts urge calm—these are long-term investments, and their value tends to recover over time. Moreover, UK households are generally less invested in the stock market compared to Americans.
There might be a silver lining. The prices of oil and key commodities like copper and sugar have dropped, which could help ease inflation. Also, the UK could benefit from lower-cost goods redirected from countries now struggling to sell to the US.
Given the global economic outlook, markets are predicting that the Bank of England might cut interest rates four more times this year—potentially easing pressure on many households.
The Bank itself believes that British families are in a relatively strong position, with household debt at its lowest level since 2001. Additionally, the UK banking system is well-equipped to handle shocks, thanks to reforms made after the 2008 financial crisis.
In short, while the UK will likely feel the strain of the global trade tensions, it may still find a few positives amid the economic turbulence.
