If the new administration implements these policies, they could pose challenges for major exporting economies worldwide, including the UK. Cebr analysis indicates that a scenario in which the US enacts a 20 per cent tariff on all imports and a 60 per cent tariff on imports from China—without retaliation—could reduce the UK economy by 0.9 per cent by the end of the Trump administration.
Donald Trump’s win could impact global trade, energy, and environmental policies.
Proposed tariffs of 20 per cent on imports and 60 per cent on Chinese goods may reduce the UK economy by 0.9 per cent, as per Cebr.
FTA could mitigate UK risks, but sticking points remain.
Tariffs would raise costs for US importers and strengthen the dollar, with minimal inflation impact in the UK.
“Estimates from the National Institute of Economic and Social Research (NIESR) suggest that 10 per cent tariffs could cut UK economic growth by 0.7 percentage points,” cited the report.
During Trump’s first term, the Brent-WTI price differential peaked at $7.34 per barrel in 2019, roughly a 118 per cent increase from the start of his administration, despite a drive to boost domestic oil and gas production. This was largely driven by buyers’ reluctance to purchase US energy exports.
Shifts in global energy dynamics make major oil price increases less likely this time around. China, a former major importer of US energy goods, now receives discounted supply from Russia, as its domestic economic slowdown has reduced energy demand. Oil and Petroleum Exporting Countries (OPEC) also has spare production capacity, as it is currently cutting output by 2.2 million barrels per day to sustain prices.
“The clearest path for the UK to avoid Trump tariffs would be to agree to a Free Trade Agreement (FTA). Trump pursued a deal much more proactively during his first term as President than Biden. Such a deal would be doubly powerful, not only by reducing existing trade barriers but also by avoiding the new wide-ranging tariff, making the UK a cheaper source of goods than those economies that are hit with the tariff. Unfortunately, the major sticking point to a deal remains food standards, and tariffs may be used to pressure the UK to accept US demands in this regard,” opined the report.
The report also indicated that as tariffs are paid by the US importer, most of that cost would likely be passed on to the consumer. In a scenario with no retaliation, this would likely lead to divergence in monetary policy between the US and other Western economies and a stronger dollar. While this would reduce some of the impact of higher tariffs, it would also make importing US goods more expensive for UK businesses. However, the effect on inflation in the UK would likely be negligible, though if the UK retaliated, the impact on inflation would be substantial.
Although tariffs generally pose economic risks to the UK, the new Trump administration could also present opportunities beyond those associated with a free trade agreement, added the Cebr report.
Fibre2Fashion News Desk (SG)
