The island’s economic outlook is being clouded by global volatility, including US tariff threats that have negatively affected UK and EU sentiment, according to the government’s 2026-27 budget document.
You can read the rest of our Budget 2026 coverage here.
The Pink Book’s economic assessment warns that “the start of the second Trump Presidency in the US has been marked with a significant shaking-up of the world trade order, with Liberation Day tariffs being raised against some the United States’ main trade partners”.
It adds: “UK and the EU economic sentiment has been negatively affected by these moves, and while both have negotiated trade deals with the US, the situation remains disadvantageous compared to the previous status quo.”
The document reveals further concerns about escalating trade tensions, saying: “At time of writing, the US is signalling further tariffs on the UK and some European countries due to tensions over Greenland.”
Markets
Despite these geopolitical risks, the budget notes that markets have been “buoyed by the promise of transformative applications of Artificial Intelligence,” with the tech-heavy US NASDAQ index rising around 22 percent over the course of 2025.
However, the assessment warns: “There remains a risk of a stock market correction, which could have knock-on impacts on government’s externally-invested reserves.”
The five-year financial plan is based on assumptions of stable economic conditions, though Treasury acknowledges that meeting targets could be jeopardised by “negative shocks such as a global economic contraction”.