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The new economic plan in the UK Rachel Reeves came under direct pressure on Thursday, after US President Donald Trump imposing a 25 percent of car crashes “crystallizing” some of the many risks facing the economy.
Within a few hours of Reeves announced Spring statementThe prospects for escalating a trade war represented a new threat to her strategy and the “very small” 9.9 billion pounds of the head she gave to herself.
Richard Hughes, head of the Independent Budget Liability Office, warned that the full World Trade War could eliminate the head space, while some economists said that the chancellor would be forced to increase the tax in their autumn budget.
“This is the crystallization of one of the risks we highlighted around our central forecast,” Hughes said on Thursday.
He said that in the worst scenario in which an additional 20 percentage tariffs around the world had been charged, and the UK took revenge: “We would lose about 1 percent of GDP at the peak.”
Hughes said that it would be very heavily striving for growth next year – which the latter would forecast hit 1.9 percent – and that medium -term growth would reduce 0.75 percent.
“Such a hit in the economy would also be a hit of revenue,” he told the BBC. “He would have consequences on costs because of his influence on inflation.
“Such a shock would be enough to delete £ 10 billion pounds for the Rachel Reeves head.”
Cars make up about 10 percent of British exports of goods in the US.
Hughes warned that Reeves’s head room was “a small part of a series of risks and shocks that could hit the economy in the UK in the next five years.”
He said that, along with tariffs, there was a risk for the outlook for domestic productivity in the UK, a warning to the Chancellor that OR could re -evaluate his consistently optimistic assessment of British growth potential.
“There are a lot of uncertainty about the recent figures and what they mean for growth and production in the UK for workers,” he said. “If the growth was only 0.1 percent less annually in the next five years, that would be enough to delete that head space.”
Hughes added that if interest rates rose by 0.6 percent, it would be enough to delete that head space. “It is a very small margin to single out against a series of fiscal goals in a world that, as we have seen, can change day by day.”
In his spring statement, Reeves announced a number of consumption reductions, including a controversial reduction of £ 4.8 billion, to fill the hole of £ 14 billion in public finances.
The day ended with 9.9 billion pounds of head against her fiscal rule, exactly the same as she left in her deciduous budget, but very little in historical standards.
Many economists think that it could be forced to increase tax later in the year to make public finances a more stable basis and “shock” against the types of Trump’s initiatives seen overnight.
Reeves’s fiscal rule “IronCLAD” means that he has to balance current consumption with tax income until the end of the scheduled period in 2029-30.
The brands of luxury cars in the UK, such as Jaguar Land Rover, Aston Martin and Bentley, would hardly hit the tariffs because they did not produce any cars in the USA.
Ian Henry, an autoanalysis-consultation expert, said that some luxury brands like Rolls-Royce and Bentley may have more flexibility to absorb larger tariffs by reducing margins on traders or trying to reduce the costs when vehicles arrive in the United States.
