A fresh round of US tariffs could tip Britain into recession, economists have warned.
Donald Trump has vowed to impose a 10 per cent levy on imports from countries willing to defend Greenland – including the UK, Denmark, Finland, France, Germany, the Netherlands, Norway and Sweden.
The tariffs would come in on February 1 and be raised on 25 per cent in June.
In a report assessing the impact of such a move, Capital Economics said it would knock up to 0.75 per cent off the UK economy.
Highlighting the ‘pain’ it could cause British carmakers and the pharmaceuticals industry, Paul dales, chief UK economist at Capital Economics, said: ‘With the UK economy currently growing by 0.2 per cent to 0.3 per cent a quarter, if this hit came all at once it could trigger a recession.’
But he added: ‘The long -term political and geopolitical consequences would be much greater.’
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The report came as the International Monetary Fund said the UK economy will continue to lag behind the US and Canada this year and next.
The projections, in the Fund’s latest World Economic Outlook report, suggests Keir Starmer and Rachel Reeves are failing in their mission to turn Britain into the fastest growing economy in the G7.
While the UK is forecast to grow by 1.3 per cent this year and 1.5 per cent in 2027, the IMF pencilled in 2.4 per cent and 2 per cent for the US and 1.6 per cent and 1.9 per cent for Canada.
The Chancellor trumpeted the IMF’s prediction that the UK will be the best performing major European economy over the next two years.
But shadow chancellor Mel Stride accused her of ‘gaslighting’ the country.
‘The fact Rachel Reeves is celebrating it shows how desperate she has become, he said.
‘The economy is flatlining. Gaslighting the country won’t fix the economy – only a serious plan to lower taxes and control welfare will.’
In a further setback, S&P Global said its ‘consumer sentiment index’ – a key measure of household confidence – has fallen to a nine-month low in a gloomy start to the year.
The index has now fallen for four months in a row.
Maryam Baluch, an economist at S&P Global, said the data for the start of 2026 ‘painted a persistently downbeat picture among UK households’.
She added: ‘Consumer confidence weakened further, with the headline index falling to a nine-month low. Additionally, households’ current financial wellbeing deteriorated sharply and to the greatest extent since last April.
‘Concerningly, labour market expectations have deteriorated. Households reported income growth from employment slowing to its weakest pace in ten months, coupled with rising concerns over job security.
‘This job market uncertainty prompted households to maintain a cautious stance on discretionary spending. However, savings nevertheless continued to come under pressure, with some households slipping into deficit to manage elevated living costs and relying on loans to bridge financial gaps.
‘As a result, January marked a further rise in demand for unsecured credit, which fed through to higher household debt.’
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