Mark Carney has warned Donald Trump that the escalating trade war will cost the world economically and damage the US most.
The governor of the Bank of England said on Friday that further escalation would have serious consequences for global GDP and US growth could fall by up to five percent.
Speaking in Newcastle, Carney said that the import tariffs imposed by the US and other countries were already slowing the global economy.
“There is a growing possibility that trade uncertainty could crystallise the longstanding risks of a snap back in long-term interest rates, increased risk aversion and a general tightening in global financial conditions,” he said.
Recent figures revealed by Carney showed that the American economy would suffer a 2.5 percent drop in GDP. The world economy would fall just over one percent.
The hit to the UK would be “smaller, reflecting a greater exchange-rate driven boost to net exports”, he said.
On Friday, the US imposed US tariffs on $34 billion (£25.7 billion) of Chinese goods. China shortly retaliated and imposed with a 25 percent tariff on US goods.
Before the tariffs went through, China accused the US of “opening fire” on the world.
Carney also hinted towards a rise in interest rates next month.
“Domestically, the incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate,” he said.
“Overall, recent domestic data suggest the economy is evolving largely in line with the May Inflation Report projections, which see demand growing at rates slightly above those of supply and domestic cost pressures building. An ongoing tightening of monetary policy over the next few years would be appropriate.”