Professor David Miles of the Office for Budget Responsibility’s (OBR) responsibility committee has told MPs that a “very limited” tariff war could be “mildly positive” for the UK.
He said there could be a scenario that some things in the UK could become cheaper, but he warned the outcomes remain “negative” amid the US President’s tariffs war which has been dubbed “Liberation Day.”
On Wednesday Donald Trump will unveil tariffs on items globally which will affect British steel and cars being sent to the US which will be hit with a 25% of levies.
Speaking to the Treasury Committee on Tuesday, Professor Miles said, “Let’s suppose there’s a very limited tariff war.
“So it’s China, Mexico, Canada, countries that are already, it’s pretty clear what Trump is going to do, and that’s it, and the UK stays out of it, so does most of the rest of the world.
“It wouldn’t be unreasonable to think that could be, if anything, very mildly positive for the UK.
“Because there’s a bit of trade that will get diverted to the UK, and some of the exports from China, for example, that would have gone to the US, they’ll be looking for a home for them in the rest of the world.”
In this scenario “stuff will be available in the UK a bit cheaper than it otherwise would have been.”
Prof Miles added, “So there is one, not central scenario at all, which is very, very mildly potentially positive to the UK. All the other ones which involve the UK facing tariffs are negative, and they’re negative to very different extents.”
Prof Miles told the cross-party committee, “If tariffs at 20, 25% were put on the UK and maintained for five years, our assessment of what that does is that it will knock out all the headroom that the Government currently has.”
