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UK exports to the world could suffer by more than 2.6% following a blanket 20% tariff on all imports to the US, according to research by economists at the University of Sussex’s Centre for Inclusive Trade Policy (CITP). The fall would have knock-on effects globally, cutting trade and knocking around £22bn ($28bn) off exports. The decline in trade would be the equivalent of an annual hit to UK economic output of 0.8%.
The NICCO set out the danger, if Donald Trump, the president-elect, implemented his campaign promise to impose a 20% tax on all imports and a 60% tariff on Chinese exports. UK sectors such as fishing, petroleum and mining would be hit, with exports likely to fall by around 20%. Businesses involved in the transportation services and providing finance and insurance are also expected to be affected by the tariffs.
Although Trump’s proposals could be a negotiating tactic, research by CITP warned the “possibility of these tariffs being imposed is certainly there”. However, the rise in tariffs put in place by Trump remains unknown. Some diplomats have speculated on any lighter tariffs for the US’ allies.
The British ambassador in the US under the previous administration, Lord Darroch, warned the UK not to underestimate the risk, stating that “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. I think he will do it.” Alternatives for the UK include negotiating a waiver deal with the Trump White House, or joining other western and European allies to send a clear message to the US Congress that American exporters would also be badly hit by any such policies.
According to the International Monetary Fund, a large scale trade war will increase inflation and cause a 7% contraction in the world economy, equivalent to the combined French and German economies
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