Economists warn that proposed 20% US tariffs could slash UK exports by £22bn.
- The sectors at risk include fishing, petroleum, mining, pharmaceuticals, and electrical goods.
- A reduction in trade with the US could lead to a 2.6% decline in UK exports and a 0.8% drop in economic output.
- Potential tariffs may cause global economic strain, affecting industries beyond direct exports.
- UK officials stress the importance of negotiating exemptions and maintaining free trade.
Economists have raised alarms about the potential imposition of a 20% tariff on UK exports to the US, which could lead to a stark £22bn decrease in export value. Such a move would impact core sectors like fishing, petroleum, mining, pharmaceuticals, and electrical goods, each facing possible export reductions of up to 20%. As trade relations with the US deteriorate, the predicted decline in exports might result in a 2.6% overall drop, equating to a 0.8% contraction in the UK’s total economic output.
The effects of these potential tariffs extend beyond direct exporters. Industries such as transportation, insurance, and finance, which play pivotal roles in supporting UK trade, could also suffer from the resulting decrease in trade flows. The sentiment is echoed by researcher Nicolo Tamberi, who notes the genuine threat posed by Trump’s inclination towards tariffs as a bargaining tool. Lord Darroch, a former UK ambassador to the US, conveys a pessimistic perspective, stating, “I’m a pessimist… Trump did tariffs in his first term on steel and aluminium. He wants to go much bigger this time. He believes in it—it’s not a bluff.”
In response to these challenges, the UK may need to contemplate strategic options, such as negotiating directly with the US for an exemption or aligning with other Western allies to counter any retaliatory actions. The necessity of emphasising the benefits of free trade to the US is highlighted by Foreign Secretary David Lammy, who insists, “Hurting your closest allies cannot be in your medium or long-term interests.” However, diplomacy alone may not suffice, as indicated by Lord Darroch’s insights.
The ramifications of these tariffs threaten not only the UK but also the wider global economy. The International Monetary Fund (IMF) has recently warned of the risk of a large-scale trade conflict diminishing global economic growth by as much as 7%, a contraction comparable to combining the economies of France and Germany. While there is speculation that Trump might consider concessions for US allies, former Trade Representative Robert Lighthizer supports a firmer stance. Chancellor Rachel Reeves and Bank of England Governor Andrew Bailey continue to advocate for free trade, cautioning that protective measures could elevate inflation and destabilise the economy.
An interesting angle in this potential upheaval is the potential benefit for some UK sectors. Should Trump impose severe tariffs on Chinese goods, British textile and clothing industries could receive a competitive edge as Chinese imports decrease, potentially bolstering the domestic market. As the situation unfolds, the UK government faces the intricate task of preserving its export strategies while navigating a rapidly evolving global trade environment.
The looming threat of US tariffs poses significant challenges for UK exports, requiring strategic navigation to safeguard economic stability.
