What do Trump’s Tariffs mean for the UK?

The recent announcement by President Donald Trump to impose significant tariffs on imports has sent ripples through the global economy, with particular implications for the United Kingdom’s employment landscape and skills development.

Rachel Reeves Beware

These protectionist measures, ostensibly aimed at safeguarding American industries, may inadvertently challenge the UK’s economic stability, especially in sectors intertwined with international trade.

Historically, the UK has maintained a robust manufacturing sector, with industries such as steel and aluminium playing pivotal roles. The imposition of a 25% tariff on steel and a 10% tariff on aluminium by the US presents immediate challenges for British exporters.

While the direct export volume to the US might not constitute the majority of the UK’s output, the broader ramifications cannot be understated. Companies like Bright Steels, based in North Yorkshire, are already confronting uncertainties, with shipments potentially arriving post-tariff implementation, thereby affecting their competitiveness and profitability. As reported by The Times, “Bright Steels, a North Yorkshire-based company, faces immediate challenges with steel shipments potentially arriving after the tariffs come into effect.”

Knock-On Effects

Beyond the immediate impact on exports, these tariffs could catalyse a series of indirect effects detrimental to the UK’s employment rates. An anticipated consequence is the diversion of steel exports from other countries, originally destined for the US, now seeking alternative markets, including the UK. This influx could saturate the domestic market, driving prices down and pressuring local manufacturers to reduce costs, often at the expense of jobs. The Community union has voiced concerns over such scenarios, urging for comprehensive safeguards to shield domestic steel from an oversupply of cheap imports. The Guardian reported that the Community union called for “comprehensive safeguards to protect domestic steel from cheap imports.”

The ripple effect extends to the broader economy. The British Chambers of Commerce (BCC) has revised its economic growth forecast, attributing the slowdown to rising employment costs and global trade uncertainties. The BCC now projects the UK economy to expand by 0.9% in 2025, down from an earlier projection of 1.3%. This deceleration is expected to impede business investment and hiring, with exports forecasted to contract by 0.5% in 2025, instead of the previously expected 0.2% rise. Reuters highlighted these concerns, noting that “businesses are concerned about increased National Insurance and minimum wage costs, which are anticipated to impact investment and hiring.”

Are We Uderestimating Trump?

Despite these concerns, there is a compelling argument in favor of Trump’s tariff strategy, particularly in the broader geopolitical contest between the United States and China. The US dollar’s status as the global reserve currency underpins much of the American economy, providing the country with unparalleled economic leverage. However, China’s long-term ambitions to challenge this dominance—whether through alternative trade agreements, the expansion of the yuan, or technological dominance—have put the US in a position where strategic countermeasures are necessary.

One of the primary goals of these tariffs is to curb China’s ability to flood the global market with cheap goods, particularly in strategic industries such as steel and aluminum. Ross Perot Jr., chairman of Perot Companies, has defended the tariffs, arguing, “For decades, China has engaged in predatory trade practices. These tariffs are a necessary tool to restore fair competition.”

Furthermore, the US is attempting to counter China’s Belt and Road Initiative (BRI), which has been instrumental in expanding Beijing’s economic influence across Africa, Asia, and Europe. By imposing tariffs and pushing for reindustrialization, Trump aims to reduce US dependence on Chinese supply chains while incentivizing domestic production. Jared Bernstein, a senior economic adviser to the White House, has argued that “reshoring critical industries is not just about jobs; it’s about national security and economic sovereignty.”

The tariffs also reinforce the dollar’s position by forcing companies and governments to adjust to higher costs, which ultimately strengthens US-based production and global dollar transactions. In contrast, China has been attempting to push the yuan in international trade, particularly in energy markets. Former US Trade Representative Robert Lighthizer has warned that “if the US does not take decisive action, China’s efforts to dethrone the dollar will gain momentum, undermining American economic leadership.”

While the UK stands to lose from Trump’s tariffs in the short term, there is a strategic question over how Britain aligns itself in this evolving global landscape. As the world’s fifth-largest economy, the UK must navigate its relationships with both the US and China, ensuring it remains competitive while safeguarding its workforce. Sir Nigel Wilson, CEO of Legal & General, has suggested that “the UK should leverage its expertise in high-value manufacturing and services rather than relying on outdated industrial models.”

While President Trump’s tariffs appear to have negative consequences for the UK’s employment and skills market, there is an undeniable strategic rationale behind them. They serve as a bulwark against China’s economic ambitions and reinforce the dollar’s global position, ensuring long-term American economic security. For the UK, this presents both a challenge and an opportunity—whether to resist these shifts or adapt by embracing new industries and economic models.