Analysts have raised concerns about the potential economic impact of President-elect Trump’s proposed tariffs on the UK economy, estimating a significant financial hit if no mitigating actions are taken.
- Trump’s plan to introduce a 60% tariff on Chinese goods and 20% on other imports could reduce the UK’s GDP by 0.9%, approximately £20 billion.
- The National Institute of Economic and Social Research forecasts a 0.7 percentage point decline in UK economic growth with even a 10% tariff.
- Securing a free-trade agreement with the US appears unlikely due to food standard issues, prompting calls for the UK to enhance its green technology sector.
- Economists highlight both challenges and opportunities for the UK under a potential Trump administration, stressing the need for strategic positioning.
The President-elect’s proposed tariff strategy involves levying a 60% tariff on Chinese products alongside a 20% tariff on all other imports. According to the Centre for Economics and Business Research (CEBR), such measures could pose significant challenges for the UK government. The CEBR estimates that, without retaliatory actions, these tariffs could lead to a reduction in the UK’s gross domestic product (GDP) by 0.9%. This potential decrease is equivalent to a £20 billion reduction based on 2023 figures.
The National Institute of Economic and Social Research provides further insights, suggesting that even a modest 10% tariff could result in a 0.7 percentage point decrease in UK economic growth. This highlights the vulnerability of the UK’s economic landscape to external trade policies implemented by the US.
In light of these potential economic impacts, experts have urged the UK government to consider alternative strategies to mitigate the effect of these tariffs. While securing a free-trade agreement with the US could offer a solution, the CEBR acknowledges that issues related to food standards present significant barriers to achieving such an agreement.
Instead of pursuing potentially unattainable trade agreements, there is a call for the UK to strengthen its leadership in green technology. This recommendation gains urgency in light of expectations that a Trump presidency might see a rollback of Joe Biden’s Inflation Reduction Act. By enhancing its green technology sector, the UK could position itself more advantageously amidst global economic shifts.
Economist Sara Pineros has emphasised the importance of this period for the Chancellor to act on pro-growth agendas, drawing attention to the dual nature of the situation as both a challenge and an opportunity. ‘Ultimately, while US tariffs and rising protectionism pose challenges, other proposals under a new Trump administration also present opportunities for the UK to adapt and thrive. Without strengthening its approach, the UK risks taking all the pain associated with a Trump presidency without realising the potential gain,’ she stated.
The potential economic ramifications of President-elect Trump’s tariff proposals underscore the importance of strategic adjustments by the UK to navigate the changing international trade environment.
