The ongoing trade tensions between the US and China pose significant risks to the UK’s manufacturing sector.
- If the US significantly raises tariffs on Chinese goods, UK exports to the US could be heavily impacted.
- Allianz Trade warns of a potential loss of £8.5 billion in UK exports amid escalating trade disputes.
- A less severe tariff scenario would still hinder UK export growth by £2.2 billion over two years.
- Capital Economics argues that the direct impact on UK’s GDP might be negligible due to balanced trade relations with the US.
The ongoing trade dispute between the United States and China could significantly impact the UK’s manufacturing sector, as highlighted by Allianz Trade. The company warns that if the US escalates tariffs on Chinese goods to 60% and imposes a 10% tariff on imports from other parts of the world, the economic repercussions could be severe. While such a scenario is considered unlikely by Allianz, the consequences for global trade and economic growth would be notable.
The potential of increasing US tariffs on Chinese imports from 13% to 25%, alongside additional 5% tariffs on imports from countries excluding Mexico and Canada, presents serious implications for the UK. Specifically, this scenario could reduce UK export growth by approximately £2.2 billion over two years, per Allianz’s analysis. Moreover, global trade growth might slow by 0.6 percentage points under these conditions.
Allianz Trade estimates that, under a worst-case scenario involving maximum tariffs, global trade growth might drop by 2.4 percentage points. The negative effects would not be confined to China and the UK alone but would ripple across multiple economies, influencing inflation and GDP growth rates globally.
Meanwhile, Capital Economics presents a more optimistic perspective, suggesting that the direct exposure of the UK to potential tariffs might be limited. Unlike China or the European Union, the UK maintains a balanced trade in goods with the US, where services exports greatly overshadow goods exports, potentially mitigating any adverse economic impacts.
In Capital Economics’ assessment, a hypothetical 10% tariff on all UK goods exports to the US would have a minimal effect on the UK’s GDP. The likely exemption of services exports and the depreciation of the pound, which could enhance the competitiveness of UK goods in the US market, play critical roles in this outlook.
The complex trade dynamics between the US and China have significant implications for global and UK economic conditions.
