Bank of England Governor Andrew Bailey offered a tempered endorsement of the newly announced US-UK trade deal, describing it as a positive development overall but cautioning that it still leaves most British exports subject to higher tariffs than before recent trade tensions began.
Speaking at an economics conference in Reykjavik, Bailey said the trade agreement struck with the United States marked progress but emphasized the broader implications for the UK economy due to ongoing global trade pressures.
Tariff Impact on UK Economy Remains a Concern
Before the announcement of the trade agreement on Thursday, the Bank of England released its own projections estimating that US tariff plans—based on policies announced as of April 29 under President Donald Trump—would reduce the size of Britain’s economy by around 0.3% over a three-year period.
The central bank highlighted that much of the economic impact would come not directly from tariffs imposed on British exports, but from indirect effects on the UK’s trade partners. Around two-thirds of the anticipated GDP hit would stem from the secondary effects of those US tariffs disrupting Britain’s broader trading environment.
Deal Offers Mixed Outcomes for Key UK Industries
The trade deal agreed on Thursday includes some relief for specific sectors. While a general 10% tariff will remain in place for most British imports, the United States has agreed to reduce the higher tariffs that had been levied on British cars, steel, and aluminum—industries seen as especially vulnerable in the previous tariff regime.
Bailey expressed cautious optimism: “It’s good news. I have to say, it’s ‘good news’ in a world where it will leave the effective tariff rate higher than it was before all of this started. I do think we need to bear that in mind.”
His remarks reflect a broader skepticism within the Bank of England about the long-term economic impact of protectionist measures and fractured global trade relationships.
Push for Open Trade Amid Post-Brexit Challenges
Bailey reiterated his longstanding view that a free and open global trading system remains vital to the UK’s economic health. He also emphasized the need to address persistent trade imbalances created by large national surpluses.
In a separate interview published Friday by the BBC, Bailey addressed the steep decline in UK goods exports to the European Union since Brexit. He urged a national effort to reverse the trend, saying Britain should do “everything we can” to restore trade flows with the bloc.
While goods exports represent a smaller fraction of the UK’s economy than in some other countries, Bailey underscored that Britain remains heavily dependent on the global economy’s overall performance.
Future Outlook Depends on Global Trade Dynamics
Bailey concluded his remarks by stressing that the UK’s economic outlook is increasingly influenced by developments beyond its borders. “The impact of all these developments on the trade front on the UK outlook, is conditional therefore not only on the UK trade agreement, but also what the rest of the world agrees as well,” he said.
The governor’s comments highlight the UK’s vulnerability to broader shifts in global trade policy, suggesting that even positive bilateral deals may have limited effect without wider international cooperation.