Chancellor Rachel Reeves has been warned that her economic roadmap may need to be “ripped up” as a global market shock triggered by Donald Trump’s new wave of tariff threats drives up UK government borrowing costs and rattles investor confidence.
The yield on 10-year UK gilts surged to over 4.63%, as global markets reacted to the US President’s aggressive protectionist rhetoric. The tariffs, aimed at reshaping global trade relationships, have fuelled a flight to the US dollar and driven up borrowing costs across Western economies — including Britain.
Trump’s move comes just as Reeves had begun implementing Labour’s fiscal agenda, which includes a commitment to ramp up public investment. But the sudden tightening of fiscal conditions could derail those ambitions.
“Trump rants and the world pays,” said Ken James, Director at Contractor Mortgage Services. “We’ve seen gilt yields jumping and borrowing costs are up — will mortgage rates be next? Reeves’ roadmap may have to be ripped up.”
The impact of Trump’s tariffs is colliding with domestic fiscal vulnerabilities. A new report from the Office for Budget Responsibility (OBR) warned that Reeves’ recent U-turns on spending restraint had left the UK more exposed to future economic shocks, with Britain’s debt-to-GDP ratio projected to skyrocket to 270% by the early 2070s.
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