Bailey warns of risks to UK economy due to global trade tensions

According to Bank of England Governor Andrew Bailey, trade tensions caused by US actions will damage the UK economy, despite the relatively small tariff burden for the island nation. 

Confirming his statements, a recently released indicator of UK private sector business activity showed a sharp drop due to global duties imposed by US President Donald Trump.

As Bailey emphasized, the reason for the blow to the UK economy will not be the trade relations between the country and the US per se, but the overall global trade environment. The United Kingdom, Bailey noted, is an open economy and is vulnerable to fragmentation of the global market.

The Bank of England is currently working on its GDP growth and inflation forecasts, which will be considered when the regulator makes its interest rate decision in May. Megan Greene, one of the regulator's nine officials authorized to vote on borrowing costs, stated this week that US tariffs are likely to have a disinflationary impact on Britain's economy. Markets expect the Bank of England to cut the rate by a quarter point on May 8 to 4.25%, according to data compiled by Bloomberg.