The looming prospect of a second Donald Trump presidency has sparked fears of a global trade war after he pledged to impose tariffs on all goods imported from US trading partners.
Describing himself as a “tariff man” while out on the campaign trail, said The Guardian, Trump has threatened levies of 10% on all goods imports, and up to 60% and 100% for China and Mexico.
The UK could well find itself in the “firing line” if Trump’s administration does bring in these levies. Britain’s trading relationship with the US is worth “more than £300bn a year, at a time when links with the EU are still boxed in by Brexit”.
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What are the potential Trump tariffs?
Trump’s previous term in office saw the beginning of an ongoing trade war between the US and China – the world’s two largest economies. The then president introduced a series of tariffs targeting “hundreds of billions of dollars in Chinese goods”, citing unfair trade policies and intellectual property theft, said Newsweek.
Trump’s campaign rhetoric suggested he could impose a blanket tariff of 10% to 20% on all goods from US trading partners, with even higher tariffs of up to 60% for China and up to 100% for Mexico. Such a move would cause major disruption to the global economy, including the UK’s.
How would tariffs impact the UK?
The US is the UK’s largest export market, so any tariffs imposed on British goods are likely to seriously affect the UK’s economy.
Analysts from the University of Sussex’s Centre for Inclusive Trade Policy estimate that if a 20% tariff is imposed, the UK could face a £22 billion loss in exports, decreasing British exports worldwide by over 2.6%. In anticipation of the move, Goldman Sachs has already downgraded its growth forecast for the UK from 1.6% to 1.4% for next year.
Which UK sectors would be most affected?
If tariffs are introduced, they are likely to hit key UK sectors such as “fishing, petroleum and mining”, potentially reducing exports in these industries by about 20%, said the BBC. Pharmaceuticals and electronics could also be affected.
And the impact would extend beyond exporters. Companies involved in transportation, insurance and finance, which support international trade, might also be negatively impacted as a result of reduced trade flows.
But some sectors, such as textiles and clothing, “could see gains due to reduced competition” if Chinese exports were hit by much higher Trump tariffs.
Could a trade deal with the US help?
The UK may agree a new trade agreement with the US, but this could come at a serious cost to UK agriculture.
Kim Darroch, the former UK ambassador to Washington, said that while Trump is likely to offer a free trade agreement, a key demand from the US is likely to be “unrestricted access to the UK market for the low-cost products of the US agricultural sector, hormone-treated beef and chlorine-washed chicken included”.
The UK is likely to face a “stark choice”, Darroch said in The Observer: either choose to side with the EU, which could impose retaliatory tariffs in response to Trump’s, or “sacrifice our agriculture”.
What next?
While some diplomats have suggested there could be “lighter” tariffs for US allies, it is thought that Trump’s top adviser on trade, Robert Lighthizer, is a “strong supporter” of the policy, said the BBC.
As Darroch said, the UK is likely to have to choose whether to cut a deal with the US to reduce the impact of tariffs on UK goods, or join with its European and other Western allies to “send a clear message to Trump and the US Congress that American exporters would also be badly hit by such policies”, said the BBC.
A full-scale trade war could have very serious consequences for the global economy. The International Monetary Fund (IMF) recently warned that such a scenario could lead to a 7% reduction in global economic output, roughly equivalent to the combined economies of France and Germany.
