Economists warn of a potential 20% tariff on UK exports to the US, risking a £22bn annual loss.
- This move could reduce UK exports by over 2.6%, complicating global economic dynamics.
- Fishing, petroleum, and pharmaceuticals are at risk of significant downturns.
- Potential tariffs might strain UK industries like transportation and finance.
- Diplomatic strategies are crucial as negotiations loom to avoid these tariffs.
The UK may face a significant economic challenge as economists warn of a potential 20% tariff on exports to the US, initiated under former President Trump’s trade policy preferences. The imposition of such tariffs could lead to a substantial £22bn annual loss in exports, significantly impacting sectors like fishing, petroleum, and pharmaceuticals.
Projected export declines exceeding 2.6% could further strain global economic conditions. The sectors expected to be most affected include fishing, petroleum, mining, pharmaceuticals, and electrical goods, with the possibility of a 20% reduction in their exports. These losses would translate to a 0.8% annual drop in the UK’s economic output, as per the estimates from CITP researchers.
The potential impact extends beyond direct export businesses to industries supporting trade such as transportation, insurance, and finance. Researcher Nicolo Tamberi has highlighted the realistic threat of these tariffs, given Trump’s historical use of tariffs as leverage.
Former UK ambassador to the US, Lord Darroch, expressed concerns over Trump’s potential tariff plans, drawing parallels with past tariffs on steel and aluminum. According to Darroch, “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.”
The UK might consider negotiating directly with the US for tariff exemptions or rallying with Western allies to convey the adverse effects of these tariffs on mutual trade interests. Foreign Secretary David Lammy emphasized informing the US on the long-term impacts of harming its allies: “Hurting your closest allies cannot be in your medium or long-term interests.” However, as per Lord Darroch, the UK cannot solely depend on diplomacy to avert tariff impositions.
International ramifications include the IMF’s warning of a broad trade war potentially shrinking the global economy by up to 7%, matching the combined economic scales of France and Germany. While some suggest potential concessions for US allies, figures like former Trade Representative Robert Lighthizer endorse a robust tariff strategy.
Despite the negative outlook, certain UK sectors could find opportunities. If Trump institutes heavy tariffs on Chinese goods, UK textile and clothing businesses might thrive, benefiting from reduced competition. This scenario highlights a potential gain for domestic markets amidst ongoing challenges.
In response to this complex trade environment, Chancellor Rachel Reeves and Bank of England Governor Andrew Bailey have reiterated their commitment to endorse free trade policies. They caution that protectionist measures could exacerbate inflation and destabilize economic foundations.
The looming threat of tariffs poses significant challenges, demanding strategic negotiation from the UK.
