Analysts say that President Trump’s 10% tariffs on UK are less than the other countries he has imposed, but they will still lead to a downgrade of growth forecasts, the loss of thousands of jobs, and a further cut in spending.
Emma Rowland of the Institute of Directors, a trade policy advisor, said that tariffs were a blow to hopes that “the UK would be able avoid the crosshairs of a global trade war.” The announcements made today only increase the difficulties that businesses in the UK face, and present an additional barrier to their growth.
The US is the UK’s largest trading partner and a major export market for UK industry, especially automotive, pharmaceutical, chemical and whisky.
Exporters to the US may be forced to re-evaluate the viability and location of the US in their supply chain. They may also have to lower their profit margins in order to stay competitive.
Rain Newton-Smith said that there are no winners in the trade war. The new tariffs will “have significant ramifications throughout the world” and be “deeply troubling to businesses”.
She said that a non-threatening response is best. “Retaliation only adds to disruption of supply chains, slows down investment and increases volatility in prices.”
“The government is right to have tried to negotiate an exemption to any tariffs that may be imposed through a bilateral deal. Negotiating stronger trading relationships will be the foundation of any success as they strive to grow their economy.
Newton-Smith said that the principle of free, fair and transparent trade is still important: “The UK should use this unpredictable time to reinforce its commitment to open, free and fair trade.” This will give businesses the confidence they need to boost productivity, encourage innovation and kick-start growth.
Rowland expressed concern about the rising tensions in the world. She said that recent IoD data showed confidence in the UK’s economy is already at a low level. “Meanwhile 59% of IoD Members are worried about the impact rising geopolitical conflicts are having on their organization,” she said. A rise in the disruption caused by tariffs will further erode confidence. According to the OBR, if the tariff rate between US and rest of world rose to 20% points at its peak, it would have a negative impact on UK GDP and eliminate the fiscal headroom for the chancellor.”
She agreed that Newton-Smith’s “pragmatic, level-headed approach” adopted by the UK was the correct one. She continued: “The UK is a trading nation with strong international connections. It benefits from this.” The IoD supports the government’s effort to maintain the position of UK Exporters in a fragmented global market.
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