How will US tariffs and economic instability impact UK savers?

A number of unprecedented events have affected global economic stability over the past decade: the COVID-19 pandemic, numerous conflicts and, more recently, the global tariffs introduced on goods imported to America.

These events caused volatility on the stock and asset markets, causing investments to fluctuate in value rapidly. As these events are often unpredictable and uncontrollable, it can lead to investors feeling vulnerable and uncertain. Incidents like conflict between nations and sudden changes to economic policy can have profound and long-lasting consequences for the UK economy too - including interest rates.

This page covers the impact of recent events on the UK economy, forecasts for the UK interest rate, and how savings accounts can help grow your money during times of economic uncertainty.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

The US placed a 10% tariff on all UK imports, in addition to a 25% tariff on automobiles and steel. While President Donald Trump has since implemented a 90-day pause on his proposed tariffs (except for China, which is subject to a 145% import tariff), the UK is still subject to the 10% blanket tariffs imposed on all countries. Speaking before the pause, UK Prime Minister Sir Keir Starmer stated the tariffs will ‘clearly’ have an impact on the UK economy. This sentiment is reflected in the IMF's 2025 growth forecast for the UK, which was cut by a third to just 1.1% in the wake of the tariffs and ensuing negotiations.

The ongoing financial conflict between China and the US may have a wide-ranging impact on the global economy as well, with escalating tariffs between the world’s two largest economics threatening potential knock-on impacts.

Global stock markets experienced a sharp decline shortly after the imposition of the US tariffs, with investors selling their assets in anticipation of economic uncertainty and poorer performance from companies across the world. In the UK, the FTSE 100 experienced its worst day since the start of the COVID-19 pandemic with a 4.95% drop.

As a result, many investors in the UK - including those holding shares through their pension funds - saw the value of their portfolios drop.

The subsequent US tariff pause saw the FTSE 100 rise by 4.2% in the early hours of trading on 10 April, demonstrating the impact of global events on asset prices. The temporary nature of the pause, which may be a reprieve rather than a full cancellation of tariffs, suggests more volatility is on the way.

Before the tariffs, economists forecast between two and four base rate cuts this year. The first occurred in February, with a second .25% cut widely expected in May.

It’s unclear how the developing tariff situation will impact the Bank of England Monetary Policy Committee’s decision-making. Before the pause, Charlie Bean, the former deputy governor of the Bank of England, stated that the MPC should cut rates by 0.5% to 4% in response to economic uncertainty. Another former member of the MPC, David Blanchflower, suggests the MPC should hold an emergency meeting and cut rates even sooner than the scheduled meeting in May.

While it’s impossible to predict what the Bank of England will do with absolute certainty, the intervention of former MPC members and forecasts from economists suggest interest rate cuts are coming soon - and may be even steeper than anticipated.

Secure a top savings rate before May’s expected base rate fall with Raisin UK.

Savings can offer an alternative to the volatility of the stock market and other assets, as there is little to no risk of your original deposit losing value (excepting the effect of inflation on spending power over the mid-to-long term).

The forecasted change in interest rates may impact the interest rate offered by banks, however, which in turn may affect which products UK savers deposit their money into.

Given the anticipated cuts to the Bank of England’s base rate, and the possibility of increasing inflation, fixed rate bonds can help savers ‘lock in’ higher interest rates and protect the value of their money from increasing inflation.

Placing your money into a one-year fixed rate bond may help ‘ride out’ the turbulence caused by the US tariffs, as well as maintaining a higher interest rate despite cuts to the Bank of England’s base rate.

Notice accounts offer higher interest rates than easy access savings accounts but more flexibility than a fixed rate bond. They may be useful during times of economic uncertainty, helping secure higher interest payments while providing the flexibility to withdraw your money (after a set notice period).

Savings kept in an easy access savings account could be affected by falling interest rates, but they do offer stability vs. holding shares and flexibility vs. fixed rate and notice account products.

Easy access savings accounts can be particularly useful for storing an emergency fund, allowing you to earn interest while having the option to instantly withdraw for unplanned expenses.

Potential increases to prices and inflation

The US is the UK’s largest export partner, with £60.4bn of goods exported to the US in 2023.

As a result, UK companies may experience reduced demand from the US as well as higher operating costs and tighter margins if tariffs are maintained. This may lead to higher costs for consumers in the UK and US as companies account for the changing landscape.

According to Clarissa Hahn, economist at Oxford Economics, fluctuating exchange rates could also lead to increased import costs, with these costs potentially passed onto UK consumers.

Prices may increase further if the government decides to respond with further tariffs on US goods coming into the UK, with £57.9bn imported in 2023. This may lead to increased inflation, although this depends on whether importers choose to source products from countries with lower or no tariffs instead.

Saving money in a sustainable and less risky manner, as well as having an emergency fund, can help protect from the impact of economic uncertainty.

Raisin UK offers high interest savings products from over 40 partner banks and building societies, including fixed rate bonds, notice accounts and easy access savings accounts. Simply create your free account and fill out a single application to compare accounts and grow your money with our partner banks.