CORRECTED-US reciprocal tariffs could cut size of UK economy by 1%, OBR says

LONDON, March 26 (Reuters) - U.S. President Donald Trump's threats to impose new reciprocal tariff rates next week on countries around the world could cut the size of the British economy by up to 1%, according to the government's independent fiscal watchdog.

The Office for Budget Responsibility (OBR) said in a scenario where the United States imposed a reciprocal 20 percentage point increase in tariffs on all trade partners Britain's economy would be 1% smaller than its central forecast in the peak year of impact in 2026-27.

The OBR said if that happened it would wipe out almost all of the government's fiscal buffer "as additional tariff revenue is more than offset by lower receipts from income, corporation, and consumption taxes".

Trump has called the proposed new tariffs a "Liberation Day" for the U.S. economy. The action aims to shrink a $1.2 trillion global goods trade deficit by raising U.S. tariffs to levels charged by other countries and counteracting their non-tariff trade barriers.