Trump's tariff warnings could push Britain into recession

Threats from Trump

The latest escalation stems from comments made by Trump in January 2026, in which he reiterated his intention to buy Greenland from Denmark, viewing it as a matter of US national security. When this was refused, Trump floated the idea of ​​imposing tariffs on Danish exports, which could indirectly affect the UK through shared supply chains and EU trade dynamics.

Trump's first term saw the imposition of broad tariffs on steel, aluminum, and many other imports, often justified under Section 232 of the Trade Expansion Act. Macroeconomic analysts from firms such as Capital Economics and JP Morgan highlighted the risk that a worst-case scenario of widespread tariffs could reduce the UK's GDP by 0.3-0.75% over three years, potentially pushing the economy into recession.

Kathleen Brooks of XTB notes that tariff threats alone can erode business confidence, leading to reduced investment and hiring.

The UK's weakness stems from its dependence on the US market, with exports to the US accounting for around 17% of total UK goods exports, particularly in sectors such as automobiles, pharmaceuticals, and machinery. This post-Brexit trade dependence and ongoing negotiations for a free trade agreement between the US and the UK further exacerbate this uncertainty.

Financial institutions provide their assessments.

Capital Economics: In a report dated January 19, economists warned that Trump's tariffs on Greenland could be an "additional burden" on the UK, potentially triggering a recession if combined with existing difficulties such as budget austerity and weak consumer confidence. Their model shows GDP would fall by 0.6% in a worst-case scenario, further exacerbating the UK's forecast of sluggish growth of 0.8% for 2026.

JP Morgan: This firm has raised its risk of a global recession to 40% due to US trade policies, noting that 10% global tariffs (with retaliatory measures) could reduce global GDP by 0.5% by 2026. For the UK, this could exacerbate existing pressures from higher energy costs and supply chain disruptions.

Moody's Analytics: Analysts predict that Trump's tariffs and immigration policies could push US inflation up to 3.6% by 2025, indirectly impacting UK exporters through reduced demand and increased input costs.

The domestic context is fragile.

External challenges emerged while the UK economy remained vulnerable. Growth was uneven, productivity gains were modest, and business investment was cautious. Households continued to grapple with high living costs, while businesses faced thin profit margins and limited pricing options.

In this context, the instability caused by tariffs could be decisive. Analysts note that when confidence is already low, small shocks – such as disruptions to trade flows or delays in capital investment – ​​can have large impacts on GDP.

A difficult policy

Tariffs can cause inflation by raising the price of inputs, but in a declining economy, they also suppress demand. For UK policymakers, this creates a dilemma: easing policy to support growth risks increasing inflation, while maintaining austerity could exacerbate the recession.

Analysts argue that this trade-off narrows the margin of error, making the economy more vulnerable to external shocks such as the US reimposing trade barriers.

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