The UK could be negatively affected by Donald Trump’s policies regarding trade, according to economists. The US President has not clarified if he will impose tariffs on the UK. Despite this, economists suggest that Britain could experience a slowdown in some of its vital trading partners. There is also a chance that industrial exports could be diverted to the US and consequently flood the UK market. The president’s wider trade policies could also have an impact on Britain’s financial markets, including a potential increase in borrowing costs.
When was asked about forthcoming tariffs, Trump stated: “The UK is way out of line but I’m sure that one… I think that one can be worked out.” He did not specify what he meant by the UK being “out of line.” One of Trump’s reasons for imposing tariffs is when countries have a trade surplus with the US. This is when they sell more to America than they import. According to Trump’s statements, this trade surplus can amount to “massive subsidies that we’re giving to Canada and to Mexico.”
Despite the UK’s Office for National Statistics estimating a £71bn trade surplus with America for 2023, the US Bureau of Economic Analysis estimates a trade surplus for the US of $14.5bn. The different ability to interpret trade accounts for the discrepancy, counting trade flows and measures of service trade such as banking and finance.
If the US were to impose tariffs on the UK, the effects could include an increased cost of imported goods for US firms and customers, leading to a potential decrease in demand for UK goods. Pharmaceuticals, cars, and power generation machinery are among the UK’s most prominent exports to the US. However, the negative repercussions of the US imposing tariffs can potentially originate from a reduction in global and EU growth. If the country’s US trading partners recede into a recession from tariffs, the analysts predict that they would lower interest rates and depreciation of their currencies, leading to expensive UK exports.
Possible knock-on effects of Trump’s wider trade policies involve a negative impact on the UK economy through the influence on supply bringing uncertainty to its exchange rate. Economists draw attention to the likelihood of dumped steel, sold below the cost of production, jeopardising the UK’s steel production. The British government could also face being under pressure if America’s higher borrowing costs spilled over, leading to a potential cut to public spending or the subsequent rise of taxes
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