Bank of England interest rate-setter and economist, Swati Dhingra, has stated that the future growth of the global economy depends on how US tariffs impact international trade.
However, she suggests that the effect on UK inflation might be less severe than anticipated. As a member of the Bank’s Monetary Policy Committee, Ms Dhingra highlighted the UK’s sensitivity to fluctuating import prices during her speech at the 2025 Dow Lecture for the National Institute of Economic and Social Research (NIESR).
She said: “After a sharp recovery from the pandemic, the world economy has stagnated and its future growth will depend on how global trade is affected by the significant shift in US trade policy.”
The economist also suggested that the “direct price-increasing effects from US tariffs to UK prices” could be “less than feared”, as main imports like refined oil are unlikely to see cost increases due to tariffs.
Instead, the impact may be felt if countries facing higher tariffs decide to pass on additional costs to the UK market. “The broader indirect effects through global markets and trade diversion are more likely to dominate and to reduce prices in the UK,” according to Ms Dhingra.
She added: “Tariffs are likely to create one-off adjustments in prices, rather than inflationary persistence. On the overall impact on inflation in the UK, the direct effect of US import costs and dollar strengthening are likely to be offset by reduced global price pressures.”
US President Donald Trump has hinted at the possibility of hiking tariffs on goods entering the country, including a proposed increase in tax on steel imports. While such tariffs could potentially boost domestic production in the US over time, they could also result in higher import prices and have repercussions for other nations that depend on it for their import-export trade.