As the first country to reach a trade agreement with President Trump to avoid higher tariffs, Britain saw “milder than feared” effects on its companies, the Bank of England said on Thursday, when it cut interest rates. But the bank said that based on information it had received from companies, “general tariff-related uncertainty still weighs on sentiment, though less so recently.”
Some British companies had paused exports to the United States in April, during Mr. Trump’s initial rollout of tariffs, but have since resumed, the central bank said. And some businesses reported that more Chinese goods, mainly in the final manufacturing stage, have since been sent to Europe.
The Bank of England’s policymakers have said that while a deal between Britain and the United States is welcomed, it is more important to the British economy that global trade tensions ease. As an open economy, Britain is vulnerable to external shocks and is likely to suffer if the economies of its major trading partners weaken.
But at the moment, domestic factors were driving the British economy more than global ones, Andrew Bailey, the governor of the Bank of England, said on Thursday, even with U.S. tariff rates appearing to be settling much higher globally than historical levels.
Mr. Trump lowered tariffs on British cars and plane parts, but left an additional 10 percent levy on most other British goods. The United States and Britain are continuing to discuss the terms of their deal to lower steel tariffs, which are currently set at 25 percent.
The Bank of England cut interest rates by a quarter point, to 4 percent, despite forecasting higher inflation over the coming months because of higher energy and food prices. It was a widely expected but deeply divided decision: Initially, just four members of the nine-member committee voted to cut rates by a quarter-point, with one more member joining after a second vote.
Eshe Nelson is a Times reporter based in London, covering economics and business news.
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