Goldman Sachs cuts UK growth forecast following Trump’s election victory
Goldman Sachs has cut its growth forecasts for the UK and the eurozone following Donald Trump’s election as President of the United States.
The investment bank warned that Trump’s proposed tariffs would have a noticeable impact on economic growth in European economies next year.
During the election campaign Trump threatened to impose tariffs of at least 10 per cent on any foreign imports, rising to 60 per cent for Chinese imports.
“Renewed trade tensions are likely to weigh materially on growth,” analysts at Goldman Sachs said.
The investment bank now expects the UK economy to grow by 1.4 per cent next year, down from a previous forecast of 1.6 per cent. It expects growth to remain at 1.4 per cent in 2026.
Goldman also reduced its forecasts for the eurozone, anticipating that the bloc will grow 0.8 per cent this year, a downgrade from its earlier forecast of 1.1 per cent.
“We expect the bulk of the growth hit to materialise between 2025Q1 and 2025Q4,” the analysts said.
If the European economies were to retaliate one-for-one, then the impact on growth would be higher with UK GDP taking a 0.7 per cent hit and the EU a 1.0 per cent blow.
While the analysts expected that the tariffs would likely be lower than 10 per cent, they noted that the “actual magnitude of the tariff increases” might matter less than the “uncertainty created”.
Addressing the issue of tariffs in the Treasury Committee this afternoon, Chancellor Rachel Reeves stressed that the UK was not a “passive actor” in the trading relationship with the US.
“We will make strong representations about the importance of free and open trade, not just between ourselves and the United States, but globally,” she said.
“I absolutely do not want to sound in any way sanguine. On the other hand, I am optimistic about our ability to shape the global economic agenda, as we have under successive governments.”
Asked whether she would impose retaliatory tariffs on the US, Reeves said “we’re not in that world and I’m not I’m not going to speculate.”