Two Ways Donald Trump’s Trade Wars Will Affect the UK Economy
Two Ways Donald Trump’s Trade Wars Will Affect the UK Economy

The Trump administration recently announced huge tariffs for steel and aluminum. This affects the largest importers of these materials, including the European Union. And this has angered US allies because the imposition is to increase the tariffs to as much as 25% on steel and 10% on aluminum. However, the POTUS has given Canada, Mexico, and the EU the option to pursue trade negotiations.

The immediate reaction of the global market is to sell off the manufacturing shares of US investors. And to rub salt to injury, some countries vowed retaliation to this policy by also imposing higher tariffs to products coming from the US. Bit how does this policy affect the UK economy?

UK Will Be Resilient to It

UK has an import-heavy economy. This means that most of its goods sold are coming from other countries, not the other way around. UK’s economy is primarily reliant on the financial services sector, even if it is also the world’s tenth largest goods exporter.

UK will be resilient to this tariff policy because the country does not export steel and aluminum. The case is different in countries like China and Germany because these countries are export-heavy. This means that China and Germany are exporting more goods to the US than what they are importing and that an increase in tariff is a serious business disruptor.

UK will hardly notice the impact of this change in policy because the country is selling too little to other countries these days. However, this policy change will be detrimental to the steel and aluminum sector of the UK. The higher tax rates will reduce what UK steel and aluminum companies earn, making them susceptible to losses. It can mean layoffs as these companies struggle to make profits due to this policy change.

It Can Impact the Brexit

When the people of the UK decided to exit the European Union, the British pound fell to its lowest level against the US dollar if compared to the last 30 years. In addition, the UK will pay the EU an exit bill of about £35 billion to £39 billion. This, of course, is an economic catastrophe.

UK leaders have been hoping to get a free trade deal with the US government. If this ever happens, it will significantly help alleviate the financial and economic pain that the people of the UK are suffering.

The problem with Trump’s decision is that as Brexit days looms to a close, the global trading atmosphere may not be as kind to the UK as it expects. When tariffs get high, every country will protect its interest and the UK, which has just exited the EU and is now completely on its own, may be inheriting old EU trade deals instead of forging new ones.

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