How can Trump’s tariffs affect the UK?

Donald Trump is not clear about whether he will impose tariffs on the UK, but economists have warned that there are still methods that may be negatively affected by the broader trade policies of the UK President, even if it is directly hit. Avoid

The impact may be felt through slow growth in some important trading partners in Britain. Industrial exports can be removed from the US and may flood the UK market and affect our financial markets, including a possible increase in borrowed costs.

Asked about future tariffs, Trump told BBC on Sunday night: “The UK is out of the line, but I’m sure one … I think one can work on one.”

The President did not specify how he considers the UK “out of line”.

One of the justification that Trump has given to impose tariffs on countries is that he has a business surplus with the US – in other words, they sell more to the US than to import from America from America.

He has claimed these business surpluses The amount of “large -scale subsidy we are giving to Canada and Mexico”.

Tariff on Mexico was stopped by Trump on Monday for a month, but the President has complained about unbalanced trade with the European Union, Saying on sunday: “They do not take our cars, they do not take our farm products, they take almost nothing and we take everything from them. Millions of cars, tremendous amounts of food and agricultural products”.

So in a way Britain can be seen out of the line in Trump’s mind – and at the risk of tariff – if Britain was also running a business surplus with America.

UK office for national statistics Estimate The UK had a surplus of about 71bn pounds in trade with the US in 2023, the most recent whole year for which we have data.

But the US Statistics Office, Economic Analysis Bureau, estimates that the US had a surplus on its business with the UK, around £ 12BN in that year of $ 14.5BN.

How can both come true?

Two data agencies have seen this discrepancy and agree that it is due to various ways to measure business.

A factor is UK agencies, unlike their American counterparts, do not count the trade flow through British crown dependence such as the Isle of Man, some of which are important financial services hubs and clearly to overall figures They affect.

Another key, related, element services seem to be a difference in the measurement of business – things like banking and finance – unlike material goods.

But the bottom line is that there is still a degree of uncertainty what the overall difference in the figures is and both agencies are trying to work.

Meanwhile, the UK government is undoubtedly hoping that President Trump would prefer to use American data, showing that the US is selling more than buying Britain – and will focus on goods rather than services business.

If the President implements a blanket tariff on the UK exports, then it will happen to the US Impress around £ 60bn goods According to UK data, sent in 2023.

Pharmaceutical products accounted for £ 8.8 billion for £ 8.8 billion of UK goods exports in that year, car £ 6.4bn and power generation machinery £ 6.4bn.

While the immediate effect of tariff will be to make the price of these imported goods higher for American firms and consumers, over time they can reduce American demand for them, which can be one Negative effects on Britain’s firms are exporting them,

There are other methods in which Britain may be negatively affected by American tariffs on other countries.

Slow growth in the global economy and, in particular, the European Union – with which the UK still performs almost half of its trade – will disrupt Britain’s growth possibilities.

If our business partners decline in the recession due to tariffs, analysts say they will cut interest rates and there will be a decline in the price to export their currencies to British.

Ahmat Kaya of the National Institute of Economic and Social Research (NIESR) said, “The US will still have a negative impact on the UK economy through its impact on supply chains and exchange rates in the US, which applies tariffs on our other business partners. “

NIESR has speculated that the US has threatened to impose 25% tariffs on Mexico and Canada may reduce the UK GDP growth by 0.1 percent in 2025.

Some economists warn exports – Such as sugar -made steel – It can be diverted from American markets due to new tariffs, can be sold below the cost of production, or “dump” in UK markets, which may negatively impact the sale of UK steel producers.

Some analysts say that US interest rates can also spread to the UK borrowed markets as a result of tariffs.

UK government borrowing cost, or one of the reasons for gilt yield, In January temporarily moved upwardsBecause the yield of US government bonds also increased.

“Trump’s tariff can be well -spillover from high US interest rates to the main threat to the UK economy, instead of tariffs itself,” Economist Julian Jesop says,

“The yield of US and UK Government Bonds is now growing again in the lockstap. If the Fed (US Central Bank) is more reluctant to cut US rates, as is likely to borrow for a long time in the UK too. The cost will be higher. “

The cost of high borrowing can slow the UK economy and pressurize the UK government to increase the taxes to cut public spending or keep it within its chosen lending rules.