By Luke Mills-Hicks.

While Trump’s highly anticipated tariffs represent a sure step away from globalization, and likely a decrease in total global trade as a result of the increased price, it may have unique implications for the United Kingdom. President Trump has already set about imposing tariffs on the States’ largest trade partners, China, Canada, and Mexico. While Trump has not currently given a timeline, he has stated that he will “definitely” be placing tariffs on members of the European Union, such as Germany, which made up 4.5% of all US imports in 2022. So with all of these planned tariffs, and nothing appearing to be specifically aimed at the United Kingdom, what are the possible impacts of tariffs on the economy of the United Kingdom?

To fully grasp the potential magnitude of this situation, it is important to understand that following the 2016 Brexit Referendum, in which the UK withdrew from the European Union, Trump labelled himself as “Mr. Brexit” on Twitter and spoke in favor of the move away from mainland Europe by the United Kingdom. This still has very real implications today, as it plays an important part in Trump’s decision-making when he is deciding which countries he may levy tariffs on. Furthermore, Trump appears to somewhat favour Keir Starmer (the current Prime Minister), saying that he and Starmer have a “very good relationship.” All of this further supports the assumption that the United Kingdom will receive immunity from Trump’s onslaught of tariffs.

Now, what are the likely implications of this for the UK economy? Currently, around 15% of all UK imports are to the US, and total trade between the two countries sums to around $150bn (import and export). If, as aforementioned, President Trump does decide to levy tariffs on many of his trade partners but chooses to leave the UK unaffected, then goods produced by the UK will become far more competitive within the US import market. This relative increase in price of all other goods should see the value of UK exports to the US increase dramatically. This increase in exports

However, very little is known about how far discussions have gone between Starmer and Trump, and much could still change. Additionally, the UK is currently 1% over its inflation target, and an increase in exports to the US may lead to more inflation occurring, which could have a very real impact on the cost of living crisis.

Again, with all of this being said, very little, if anything, has been set in stone yet, so we are yet to see what the future holds, whether positive or negative.