US elections: ‘Steep challenges’ for trade as UK exports could fall by £22bn

Trade experts have warned Donald Trump’s proposed tariffs could pose “steep challenges” for the UK’s trade, with exports at risk of falling by £22bn. 

Ahead of his victory in the US election, Trump said he wants to increase tariffs on goods imported from around the world by 10 per cent, rising to 60 per cent on items from China.

And UK businesses are facing up to the prospect of a threat to the British economy, with trading costs set to soar with their largest export market.

The government has expressed caution ahead of tariff speculation, with cabinet minister Pat McFadden telling Sky News that “a lot of fiery things are said” in an election campaign.

“The important thing is what [Trump] actually does,” he added. “We obviously have interests as a trading nation. 

“We want to protect and look after our interests, and we always want to have a dialogue with the US administration about those.”

And shadow Chancellor Mel Stride stressed that in the context of a potential trade war, it is important the government makes sure the “mood music” is right with the new administration.

‘Reshape global trade’

Potential tariffs could have a major impact on the world economy, as they lead to increased uncertainty, Marco Forgione, director general of the Chartered Institute of Export and International Trade (CIE&IT) said.

Trump’s proposed tariffs – which he argues would restore manufacturing in the US – could “reshape global trade”, he said, with the International Monetary Fund (IMF) warning they could “wipe out the equivalent of the French and German economies from global GDP”. 

Forgione observed demand among US consumers for British food and drink is currently rising, with UK produce seen as “traditional, healthy and high quality”.

But he cautioned: “If you put a 20 per cent universal tariff on goods entering America, then it instantly becomes a very challenging market for us here in the UK.

“Nobody would win from getting involved in a tit-for-tat exchange of tariffs.”

An added surge in US import demand could be seen in the short-term, he predicted, with businesses shipping higher levels of non-time sensitive goods ahead of any introduction.

Ultimately, “in the short term this leads to even more uncertainty for traders at a time when the global market has been impacted by disruption in the Red Sea, war in Europe and climate change,” Forgione said.

‘Key barrier’ for SMEs

Costs of international trade are also “one of the key barriers facing UK small firms trading overseas”, Tina McKenzie, from the Federation of Small Businesses (FSB) stressed.

The US is the “top non-European market” for small UK-based international traders, she added, with 59 per cent and 32 per cent exporting and importing goods to and from the US.

And “any new tariffs and non-tariff barriers would hit small exporters and potential exporters the most”, she warned.

While Nicolo Tamberi, from the Centre for Inclusive Trade Policy (CITP), warned that if Trump opted to bring in the levies “they could reduce UK’s exports by £22bn”.

He said: “It’s clear that while some industries may find new opportunities in a reconfigured global trade landscape, most will face steep challenges in adjusting to these changes.”

UK imports, he said, could also drop by £1.4bn, with “some sectors, like fishing and petroleum, particularly hard-hit due to their high sensitivity to tariff changes”.

However, Tamberi noted that some sectors, such as textiles, may “benefit from trade diversion as the US shifts demand away from China”.

The threat of tariffs, he observed, could end up “being a negotiating tactic, but nevertheless the possibility of these tariffs being imposed is certainly there”.

While retaliation, he warned, “would only make the numbers worse, but may be hard to avoid”.