Britain will still be affected by trade war.

U.S. President Trump has implemented a 25% tariff on imports from Mexico and Canada, while increasing tariffs on goods from China from 10% to 20%. British Finance Minister Reeves stated on March 4 that even if a trade agreement is reached between the UK and the U.S., the ongoing trade conflict between the U.S. and its allies will still adversely affect the British economy, leading to slower domestic GDP growth and heightened inflation.
Furthermore, foreign exporters may engage in aggressive sales of their inventories that are no longer competitive in the U.S. market, potentially undermining the competitiveness of British manufacturers.
Additionally, the U.S. is anticipated to soon impose tariffs on British steel and aluminum exports, with reciprocal tariffs on British goods expected to commence in April. British Prime Minister Starmer has committed to increasing defense spending to 2.5% of the UK’s GDP by 2027.

Trump’s tariff policy could serve as a bargaining chip, potentially prompting the UK and the EU to participate in a trade conflict with China as a prerequisite for tariff exemptions. Furthermore, the British government may encounter pressure from domestic industries, as the lower production costs in China hinder British manufacturers’ ability to compete with Chinese electric vehicles on pricing.

Conversely, if exports to the United States become more costly, EU manufacturers might resort to flooding the UK market with substantial quantities of goods. In 2023, the EU exported goods worth €498 billion to the United States, with €208 billion comprising machinery and transport equipment, including €54 billion in automobiles. The resulting lower import prices from this influx of goods has slowed the growth of the UK economy and negatively impacted the central bank’s economic growth projections. Additionally, the looming threat of tariffs may heighten uncertainty in the global economy, causing companies to delay their investment decisions.

***Photo reference: The Mirror***