The UK could face a £22bn hit to its exports if Donald Trump imposes a blanket 20% tariff on all imports into the US, according to a new analysis.
UK exports to the world could fall more than 2.6% due to lower trade with the US and knock-on effects globally, economists at the University of Sussex’s Centre for Inclusive Trade Policy (CITP) said.
This fall could happen if the President-elect went through with his repeated campaign promise to levy a 20% tax on all imports, and a 60% tariff on Chinese imports.
The decline in trade would be the equivalent of an annual hit to UK economic output of 0.8%.
Although Trump’s aggressive pledges could be a negotiating tactic, the “possibility of these tariffs being imposed is certainly there”, researcher Nicolo Tamberi said in a blog post.
The main UK sectors likely to be hit would be fishing, petroleum, and mining, which could see exports fall by around a fifth.
The pharmaceutical and electrical sectors would also be hit.
Even businesses that are not exporters themselves could be affected.
For example, firms supplying transportation services, which rely on strong trade flows, would take a hit.
Insurance and finance services also support the underlying goods trade.
However, some sectors could benefit from reduced China exports to the US.
Textiles and clothing could see gains due to reduced competition, if Chinese exports were hit by much higher Trump tariffs.
Just how sharp the increase in border taxes under Donald Trump might be remains unclear. Some diplomats have pointed to more pragmatic suggestions about lighter tariffs for US allies.
But Trump’s top adviser on trade, former Trade Representative Robert Lighthizer, is a strong supporter of the tactic.
The Foreign Secretary David Lammy recently told the BBC’s Newscast podcast: “We will seek to ensure and to get across to the United States – and I believe that they would understand this – that hurting your closest allies cannot be in your medium or long-term interests, whatever the pursuit of public policy in relation to some of the problems posed by China.”
But the British ambassador in the US under Trump’s previous administration, Lord Darroch, has warned the UK should not underestimate the risks.
“I’m a pessimist,” he told BBC Newsnight on Thursday. “Trump did tariffs in his first term on steel and aluminium. He wants to go much bigger this time. He believes in it – it’s not a bluff. I think he will do it.”
Chancellor Rachel Reeves and Bank of England Governor Andrew Bailey have both said they will continue to make the argument for free trade.
The UK might be in a position to have to choose whether to try to cut a side deal with the Trump White House to avoid tariffs.
Alternatively the UK could join with other Western and European allies to send a clear message to Trump and the US Congress that American exporters would also be badly hit by such policies.
The CITP numbers only assume that the US sets tariffs on the world, and do not assume a likely trade retaliation from Europe or Asia.
The IMF recently warned that a large scale trade war would drive up inflation and lead to the world economy shrinking 7%, effectively the size of the French and German economies combined.