LONDON, Nov. 6 (Xinhua) -- A United Kingdom (UK) think tank has projected that the country's Gross Domestic Product (GDP) could shrink by 0.7 percentage points if President-elect Trump enforces a 10 percent tariff on all imported goods.
The National Institute of Economic and Social Research (NIESR) estimated that UK GDP growth could be approximately 0.7 percentage points lower in the first year following the tariff implementation, 0.5 percentage points lower in the second year, and between 0.2 to 0.3 percentage points lower in the third year.
Ahmet Kaya, a principal economist at NIESR with a focus on international trade, outlined several ways in which such tariffs might affect the UK economy.
"The primary factor is global growth. Our projections indicate that global trade growth could slow by around 1.5 percent per year. Additionally, the inflationary effects of these tariffs could lead to higher interest rates, indirectly impacting the UK. For the UK, we anticipate inflation to rise by approximately 3 to 4 percentage points as a result," said Kaya.
"This inflation rise would likely result in an increase of around 2.2 to 3 percentage points in interest rates, reducing both consumption and investment, thereby contributing to slower GDP growth," he added.
Kaya further noted that the projected tariff increase might lower U.S. GDP growth by approximately 1.3 to 1.8 percentage points, depending on whether U.S. trade partners respond with countermeasures. Over a five-year period, the cumulative effect could reduce U.S. GDP by up to 4 percent compared to a scenario without additional tariffs.
Without the impact of the tariff, NIESR forecasted in the report published overnight before the U.S. election results came in that the UK's GDP would grow at 1.2 percent in 2025 and 1.4 percent in 2026.
