Director Weekly  Tariff chaos in the US is a reminder that external shocks could knock the UK economy off track in 2026

Such chaotic policymaking creates deep uncertainty, which will surely dampen global trade. And this is far from the end of the story: the new tariffs expire after 150 days unless renewed by Congress. Exporters should brace for further changes in July.

Already, some British businesses are deciding that US unpredictability demands a change in direction. The Times reports that Brompton Bikes closed its New York and Washington stores last year but opened one in Shenzhen, and doubled the size of its Shanghai shop. Brompton’s managing director, Will Butler-Adams, said: “We have changed our strategy in America because… we decided that the leadership was so unpredictable, anything could happen.”

This episode is a reminder that the UK economy remains vulnerable to external shocks and decisions over which we have little influence.

And in truth, tariffs could quickly be overshadowed by more worrying events. Concerns about potential US strikes on Iran are growing. The geopolitical picture looks highly volatile.

That’s leading to increasing pressure on the government to raise defence spending faster than planned. Despite ministers’ robust rhetoric, the FT reports that core defence spending will be a smaller share of GDP in 2027-28 than previously thought.

That brings us to next week’s Spring Statement. The Treasury continues to stress that this will be a non-event, fiscally speaking. But questions are already mounting. Will the government move on defence? How will it respond to growing pressure on student loans? And how will it fund the additional £3.5bn announced in the new special educational needs and disabilities (SEND) strategy?

As ever, the Chancellor has three options for funding new commitments: to raid existing budgets, to raise taxes, or to borrow more. Lenders have made clear that they do not want additional borrowing, so the Treasury’s options are limited.

Higher-than-expected tax receipts in January provide some wriggle room. But the government still faces tough choices.

Unfortunately, the truth is that the political class – and, arguably, the British public – are consumed by “cake-ism”: being both in favour of having cake and of eating it, as Boris Johnson put it.

We face genuinely difficult trade-offs and conflicting demands, yet politicians too often seem unable to confront that reality. The result is confusion and contradiction: grand ambitions for growth followed by crippling cost increases for business, for instance.

It was interesting, therefore, to hear Robert Jenrick – Reform UK’s Treasury spokesman – acknowledge the reality of trade-offs in his first major speech. There is a gulf between recognising the existence of trade-offs and acting accordingly. But it is a start.

The Spring Statement is not expected to bring significant new announcements. That will be a relief to business. As the government grapples with the challenges facing the UK, perhaps the most important thing it could provide is a more honest appraisal of the dilemmas confronting us – and consistency in how they tackle them.

Read the IoD’s statement on January’s welcome fall in inflation here.