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Reeves' economic plans “ripped up” as Government borrowing costs surge over Trump's tariffs

ended 08. July 2025

Government borrowing costs have surged after Donald Trump launched his latest tariff barrage, with experts warning Chancellor Rachel Reeves may have to rip up her economic roadmap.

Bond yields shot up as Trump tried to apply pressure on countries to agree new trade deals.

The yield on 10-year UK gilts climbed five basis points - pushing the cost of borrowing above 4.63pc.

This comes as The Office for Budget Responsibility (OBR) also warned that Reeves’ latest U-turns on spending cuts have left Britain more vulnerable and less able to respond to future crises. 

The OBR published a new report on the vulnerability of the public finances, warning that the UK’s debt-to-GDP ratio is set to surge from 100% today to a whopping 270% by the early 2070s.

John Woolfitt, Director at Atlantic Capital Markets, said mortgages and loans could be affected.

He continued: "Tariffs and economic uncertainty push investors toward the USD, a safe haven especially with US yield rising. While UK bond yields are also rising this will offer some support to the GBP in the short term,but only if markets believe the UK economy can take the pressure. 

"The impact for lenders could be more direct, Higher gilt yields push up the cost of borrowing for banks, which translates into higher borrowing costs for consumers, and if inflation expectations rise due to global supply shocks the BoE may even delay rate cuts. 

"If economic growth slows from trade disruptions, the BoE could face a real problem, do they fight inflation or support growth? The chancellor will face increased debt servicing costs. If this becomes a prolonged issue then it could trigger a broader sell-off in bonds, pushing global yields even higher. The global impact will likely see trade slow as new tariffs disrupt global trade flows, increase costs for businesses and consumers, and reduce global GDP growth."

Ken James, Director at Contractor Mortgage Services, said Reeves' economic plans will have to be “ripped up”.

He added: "Trump rants and the world pays. Donald Trump’s latest tariff threats have once again sent ripples of uncertainty through global financial markets, the effect of which are already hitting home here in the UK. We have seen gilt yields jumping and borrowing costs are up, will mortgage rates be next? 

“As pressure starts to mount on the pound and with the economy contracting in April, the pressure is mounting on Chancellor Rachel Reeves as she now faces tighter fiscal conditions just as she plans to ramp up public investment. Her economic roadmap may have to be ripped up. It would seem that Trump has created another fly in Labour's inkwell.”

Samuel Mather-Holgate, Independent Financial Adviser at Mather and Murray Financial, doubts Trump will follow through with his tariff threats.

He said: "Trump’s personality thrives on uncertainty, but his policies don’t. The longer this continues the more damage he will do to the US economy and eventually the TACO president will have to chicken out again. 

“I doubt lenders will react to this latest spike, as it will probably be temporary. The pound will strengthen against the dollar, but as our economy is more like the States than Europe, we’ll see a decline against the Euro just as holiday season approaches.”

Tony Redondo, Founder at Cosmos Currency Exchange, said Trump’s tariffs have spiked UK gilt yields above Liz Truss levels.

He added: "The Pound is down against all sixteen of its main currency peers and likely to weaken further as import costs rise, and the markets give an 83% chance that the Bank of England will cut interest rates at their next meeting on 7 August to 4% and down to 3.5% by mid-2026, lowering mortgage rates, but inflation risks could keep rates high. 

"UK GDP growth is already feeble after the £40bn of additional business taxes levied last October and tariff uncertainty will only exacerbate the outlook. Global GDP may drop by 1% by 2027. 

“Uncertainty could worsen recession risks (60% chance), raise inflation, and strain finances. A US-UK trade deal could ease impacts, but ongoing tariff threats risk market volatility and higher borrowing costs.”

Kundan Bhaduri, Entrepreneur at The Kushman Group, said "gilt yields are dancing to Donald's tariff tune".

He said: "Trump's latest tariff tantrum is proving yet again that when America sneezes, British borrowing costs catch pneumonia. For those of us managing property portfolios, it is like watching your mortgage rate climb while someone else holds the ladder. 

"The knock-on effects are pretty predictable. Sterling wobbles, import costs rise, and the Bank of England gets twitchy about inflation. Just as the housing market needs stability, we are getting Trump-induced turbulence. Rachel Reeves must be reaching for the aspirin and a pillow to scream into. 

“Higher borrowing costs slash her fiscal headroom by billions, precisely when Labour needs every penny for its promised public sector reforms. Each additional basis point adds roughly £5 billion to the government's annual debt servicing costs. Markets loathe uncertainty and Trump is delivering it aplenty. Until sanity prevails, expect gilt yields to keep dancing to Donald's tariff tune.”

David Stirling, Director at Mint Mortgages & Protection, agreed, adding: "Trump tweets, gilts jump, and Rachel Reeves winces. Trump's latest tariff salvo has jolted markets, pushing UK borrowing costs above 4.63%. 

“Mortgage rates could follow suit, which would be bad news for anyone hoping to get on the ladder before it’s pulled up.”

Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, warned that “more debt is coming”.

He said: "Trump will take the blame but government borrowing costs are also a reflection of the spending policies of the past few governments. It seems there is no problem that more money can't fix and yet no problems actually seem to get solved. 

“The market knows more debt is coming and so wants to be adequately compensated in what is becoming a riskier environment.”

Chris Barry, Director at Thomas Legal, added: “Trump has committed to a spending bill throughout his term which will increase US borrowing and their deficit by trillions of dollars by 2030. Tariffs move some way to help supporting the US spending plan but in reality the amount of money being created will only devalue the dollar and increase asset prices such as property, gold and bitcoin. The UK will do what it always does and follow in the shadow of the US.”

8 responses from the Newspage community

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Editor
Ken James
Director at Contractor Mortgage Services
Trump rants and the world pays. Donald Trump’s latest tariff threats have once again sent ripples of uncertainty through global financial markets, the effect of which are already hitting home here in the UK. We have seen gilt yields jumping and borrowing costs are up, will mortgage rates be next? As pressure starts to mount on the pound and interest rates in flux, This comes at a crucial time for Chancellor Rachel Reeves as she now faces tighter fiscal conditions just as she plans to ramp up public investment. Her economic roadmap have to be ripped up - it would seem that Trump has created another fly in Labour's inkwell.
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Editor
Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
Trump’s personality thrives on uncertainty, but his policies don’t. The longer this continues the more damage he will do to the US economy and eventually the TACO president will have to chicken out again. I doubt lenders will react to this latest spike, as it will probably be temporary. The pound will strengthen against the dollar, but as our economy is more like the States than Europe, we’ll see a decline against the Euro just as holiday season approaches.
Copy

Editor
Tony Redondo
Founder at Cosmos Currency Exchange
Trump’s tariffs have spiked UK gilt yields above 4.63% this morning, above Liz Truss levels, impacting the pound, interest rates, and the economy. The Pound is down against all sixteen of its main currency peers and likely to weaken further as import costs rise, and the markets give an 83% chance that the Bank of England will cut interest rates at their next meeting on 7 August to 4% and down to 3.5% by mid-2026, lowering mortgage rates (e.g., 3.89% two-year fixes), but inflation risks could keep rates high. UK GDP growth is already feeble after the £40bn of additional business taxes levied last October and tariff uncertainty will only exacerbate the outlook. Global GDP may drop by 1% by 2027. Uncertainty could worsen recession risks (60% chance), raise inflation, and strain finances. A US-UK trade deal could ease impacts, but ongoing tariff threats risk market volatility and higher borrowing costs.
Copy

Editor
David Stirling
Independent Financial Adviser at Mint Wealth
Trump tweets, gilts jump, and Rachel Reeves winces. Trump's latest tariff salvo has jolted markets, pushing UK borrowing costs above 4.63%. Mortgage rates could follow suit, which would be bad news for anyone hoping to get on the ladder before it’s pulled up.
Copy

Editor
Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
Trump will take the blame but government borrowing costs are also a reflection of the spending policies of the past few governments. It seems there is no problem that more money can't fix and yet no problems actually seem to get solved. The market knows more debt is coming and so wants to be adequately compensated in what is becoming a riskier environment.
Copy

Editor
Chris Barry
Director at Thomas Legal
Trump has committed to a spending bill throughout his term which will increase US borrowing and their deficit by trillions of dollars by 2030. Tariffs move some way to help supporting the US spending plan but in reality the amount of money being created will only devalue the dollar and increase asset prices such as property, gold and bitcoin. The UK will do what it always does and follow in the shadow of the US
Copy

Kundan Bhaduri
Entrepreneur, Investor and Landlord at The Kushman Group
Trump's latest tariff tantrum is proving yet again that when America sneezes, British borrowing costs catch pneumonia. For those of us managing property portfolios, it is like watching your mortgage rate climb while someone else holds the ladder.

The knock-on effects are pretty predictable. Sterling wobbles, import costs rise, and the Bank of England gets twitchy about inflation. Just as the housing market needs stability, we are getting Trump-induced turbulence.

Rachel Reeves must be reaching for the aspirin and a pillow to scream into. Higher borrowing costs slash her fiscal headroom by billions, precisely when Labour needs every penny for its promised public sector reforms.

Each additional basis point adds roughly £5 billion to the government's annual debt servicing costs. Markets loathe uncertainty and Trump is delivering it aplenty. Until sanity prevails, expect gilt yields to keep dancing to Donald's tariff tune.
Copy

John Woolfitt
Director at Atlantic Capital Markets
Tariffs and economic uncertainty push investors toward the USD, a safe haven especially with US yield rising. While UK bond yields are also rising this will offer some support to the GBP in the short term,but only if markets believe the UK economy can take the pressure. The impact for lenders could be more direct, Higher gilt yields push up the cost of borrowing for banks, which translates into higher borrowing costs for consumers, and if inflation expectations rise due to global supply shocks the BoE may even delay rate cuts. If economic growth slows from trade disruptions, the BoE could face a real problem, do they fight inflation or support growth? The chancellor will face increased debt servicing costs. If this becomes a prolonged issue then it could trigger a broader sell-off in bonds, pushing global yields even higher. The global impact will likely see trade slow as new tariffs disrupt global trade flows, increase costs for businesses and consumers, and reduce global GDP growth.