College Green Group blog

Trump’s Tariffs and the UK: Navigating a New Trade Battleground

How Trump’s tariffs could reshape UK trade: Brexit, economic resilience, and the choice between US and EU alliances in 2024.

For much of 2024 and the historic US presidential election campaign trail, the possibility of a second “Trump Tariff War” with China, for example, has been met with deep concern from Democrats and other international actors. Trump recognises the economic priorities that his base, and the 49.8% of Americans who voted for him, have – specifically tackling inflation. In this regard, the newly inaugurated President intends on making use of his first 100 days to put his stamp on the nation’s finances and dismantle much of what his predecessor, Joe Biden, had constructed in terms of trade.

It is important to note that the President’s ‘influence’ over the economy is actually marginal. Therefore, fiscal weakness or instability is often not the fault of the President. Maintaining this, what does characterise a strong economic performance is how they react to said occurrences. With Trump citing China, Mexico and Canada as potential victims of steeper tariffs, the UK‘s position with this global economic colossus may become more nuanced. Britain may need to assess what bloc it should align closer to – ultimately this will be paramount for the economy to flourish and crucially grow.

The UK’s resilience to Trump’s tariff policies

While it remains uncertain whether Trump’s tariff policies will directly harm the UK, the International Monetary Fund (IMF) has warned: “An intensification of protectionist policies… in the form of a new wave of tariffs, could exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and again disrupt supply chains.” Though the IMF did not mention Trump by name, the statement clearly alludes to his policies.

Despite this warning, the impact on the UK and the EU will differ, even with the UK’s extensive trade relationships with both. The US is the UK’s largest individual trading partner but accounts for only about 10% of total imports. As a result, the overall economic impact may be less severe than feared, much like in the previous tariff war, which left the UK with no lasting damage. While some industries – such as the automotive sector, which depends on China for electric vehicle batteries – face potential risks from steep cost increases, these effects are unlikely to be felt nationwide.

Chancellor of the Exchequer Rachel Reeves has positioned the UK as a formidable G7 economy, likely second only to the US in growth, even as retailers and major employers warn of price spikes and potential job losses due to the tariffs.

Should the UK choose the US over the EU?

The ideal scenario for the UK under a second Trump presidency is maintaining trade with both the US and the EU. Aligning too closely with either could undermine previous efforts to establish strong trading relationships. If the UK were to engage exclusively with the EU, tariff de-escalation with the US would likely be reversed. Conversely, turning away from the EU again would weaken the UK’s global influence, trade partnerships, and economic opportunities – losses the US alone could not offset.

While recent signs of trade de-escalation offer some relief, the global trade landscape remains volatile. Should tensions escalate, the UK would likely be best positioned aligning with the EU – its largest trading partner – to mount an effective response.

Navigating trade uncertainty

The UK’s ability to weather the last wave of disruptive tariffs demonstrates its resilience, but ideally, it would collaborate with President Trump during his second term. This period is crucial for the UK economy, positioning it at a crossroads amid the potential for escalating global trade tensions. If forced to choose between trading blocs, the EU remains the most logical option, offering long-term stability as the UK’s largest partner. However, as discussed, aligning exclusively with one side is far from ideal.

In the long run, the UK can still thrive even if Trump’s tariffs proceed as planned. Success will depend on preserving the progress made in establishing strong trade alliances. Now more than ever, trade policy must withstand the pressures of escalation and avoid succumbing to the instability of a potentially hostile economic climate.

Want to know more? Sign up to our newsletter here.

About the author