By Anant Chandak and Shaloo Shrivastava

BENGALURU (Reuters)

Global trade tensions sparked by U.S. President Donald Trump’s tariffs have hurt UK business sentiment and will slow economic growth, according to a Reuters poll of economists who maintained expectations for one Bank of England interest rate cut per quarter.

U.S. tariffs have negatively impacted business sentiment in the UK, according to all 25 respondents in an April 16-23 poll who answered an additional question, including one who expressed very negative sentiments.

The survey was conducted after Trump announced a 90-day pause on his larger-than-expected tariffs on major trading partners around the world except for China, which faced increased levies. The UK was impacted by the lowest tariff at 10%.

More than 40% of common contributors who participated in the April and March polls (20 of 45) cut their growth forecasts, with the median now at 0.9% versus 1.0%, marking a decrease for the fourth consecutive month.

Over two-thirds reduced their UK growth forecast for next year, adjusting the median to 1.2% from 1.4% in March.

Gabriella Willis, UK economist at Santander (BME: SAN) CIB, noted, “We expect tariff-induced shocks to business investment will echo that of Brexit.” She referred to businesses that were already cautious ahead of the increase in National Insurance Contributions (NICs) and suggested that the uncertainty from tariffs would further solidify this caution.

A separate business survey indicated that British private-sector activity weakened the most in over two years in April.

The International Monetary Fund (IMF) on Tuesday downgraded its 2025 UK growth forecast to 1.1% from 1.6% in January, coinciding with an overall downgrade for advanced economies.

Sanjay Raja, chief UK economist at Deutsche Bank, commented, “At the moment we have a very modest U.S. tariff impact on UK GDP.” He anticipates that indirect effects from trade shocks will manifest through reduced business investment.

At present, economists remain optimistic regarding inflation. Poll medians show a peak at 3.3% next quarter, lower than the Bank of England’s (BoE) February forecast of 3.7% for that period.

Inflation is expected to average 3.1% in 2025 and 2.3% in 2026, largely unchanged from the March survey.

On Tuesday, BoE Monetary Policy Committee member Megan Greene mentioned that risks from tariffs are “disinflationary” rather than inflationary, allowing for a “cautious” approach to rate cuts.

The overall cautious outlook for UK rates has remained stable since last month and has been consistent since September.

The BoE, having reduced the Bank Rate by 75 basis points to 4.50% since initiating its easing cycle in August, is expected to implement a 25 bps cut each quarter, concluding the year at 3.75%.

Interest rate futures are anticipating about 100 bps more reductions this year.

(Other stories from the Reuters global economic poll)