The ace up the UK’s sleeve: How cheaper imports could spark UK growth through lowering inflation

With the dust starting to settle following President Trump’s announcements and subsequent 90-day pause on higher-band tariffs – with the exception of China – what does the current status quo mean for the UK?

Inflation figures due to be released by the ONS on Wednesday are expected to show that UK inflation remains relatively sticky. In light of this and amid rumours that the UK government might want to impose its own tariffs, let’s take a look at what the global tariff position could signal for UK businesses and consumers.

A new twist in global trade

Eye-watering US tariffs on Chinese goods has resulted in an explosive showdown between two superpowers that is stirring up a shift in global supply chains. But it could unexpectedly favour the UK. While China redirects its exports to bypass American price hikes, the UK stands to gain from an influx of competitively priced products. With Chinese goods already making up an estimated 20–30% of the UK’s consumer price index basket, this pivot could redefine market dynamics across key sectors like electronics, clothing, and machinery.

Inflation under pressure

Imagine a realistic scenario where intensified competition pushes prices down by about 10% in these sectors. A straightforward calculation based on standard economic modelling suggests a direct price drop of around 3% is feasible within this market segment. However, empirical research indicates that only 30–50% of these savings translate to lower consumer prices due to the imperfect pass-through effect. The net result? A potential reduction in headline inflation by roughly 0.8% to 1.2% over a one-to-two-year period. A meaningful deflationary push that could rejuvenate consumer spending.

Policy leeway for economic revival

Lower inflation isn’t only a win for shoppers, but it opens the door for the Bank of England to adjust monetary policy, potentially slashing interest rates and lowering borrowing costs. In this scenario, a hands-off approach may be the smarter play. Instead of rushing in with new tariffs, allowing the market to absorb and pass on the benefits of cheaper imports could fortify the UK economy without inviting unnecessary disruption.

Time to let market forces lead

The bottom line is clear: UK policymakers should not fear the ebb of protectionist impulses. Rather than imposing additional tariffs that might stifle these positive trends, they’d do well to “drag their feet” on interventions. By capitalizing on this unique convergence of global trade dynamics, the UK can leverage cheaper imports to drive down inflation and foster an environment primed for renewed economic growth, a refreshing strategic pivot in uncertain times.

Why this could be good news for business and what to watch for?

While uncertainty around inflation and trade can feel unsettling, there is a real upside here for UK businesses. An influx of lower-cost imports could ease cost pressures on retailers and manufacturers alike, helping to stabilise margins without squeezing customers. This opens the door for more competitive pricing, potential market share gains, and renewed consumer demand. With inflation easing, lower interest rates may follow, boosting borrowing, investment, and business confidence.

However, businesses should also remain alert to potential risks. Volatility in global supply chains, particularly if US-China tensions escalate, could still disrupt availability or delivery times. Currency fluctuations may also impact import costs, especially if sterling weakens. And while lower inflation is broadly positive, it may also signal softer demand in some sectors, something firms should monitor closely.

Now is a smart time to strengthen supplier relationships, stress-test pricing strategies, and maintain financial flexibility so businesses are positioned to seize opportunities while staying resilient to shocks.