Trump tariffs could shrink UK economy by nearly 1%, warns think tank

LONDON

US President-elect Donald Trump's trade policies could have a significant blow to the UK economy, with economists estimating a nearly 1% contraction in GDP if harsh tariffs are imposed.

The Centre for Economics and Business Research (CEBR) on Monday projected that the UK economy could face substantial fallout if the US adopts a protectionist stance under Trump’s leadership.

The think tank’s analysis suggests that a 20% tariff on all US imports, combined with a 60% tariff on Chinese goods, would create global ripples, leaving the UK particularly vulnerable.

This forecast assumes no retaliatory measures from other nations.

Trade tensions could hit energy, food

The CEBR also cautions that the global energy market could become more volatile. Retaliatory actions to US tariffs may push up energy prices, leading to higher costs for businesses and households in the UK.

During Trump’s first term, the price differential between Brent crude and WTI crude surged 118%, driven by resistance to US energy exports, the CEBR said.

While current dynamics, such as China sourcing cheaper energy from Russia and OPEC’s production cuts, could temper price rises, uncertainty remains.

One of the simplest solutions to avoiding new tariffs would be for the UK to secure a Free Trade Agreement (FTA) with the US. However, the CEBR highlighted ongoing challenges, particularly around food standards, as a major obstacle.

The US has pushed for the UK to adopt American standards, which diverge significantly from those upheld in the European Union.

US pressure on UK’s economic choices

A senior Trump adviser recently underscored these tensions, suggesting that the UK must decide between aligning with the EU’s regulatory framework or embracing the US economic model.

They hinted that Trump’s next administration might be more willing to finalize an FTA if the UK distances itself from what the adviser described as "EU socialism."

The CEBR emphasized that Trump’s return to power would reshape global trade, energy, and environmental policies, with consequences for international partners like the UK.

Analysts warn that Britain's position as a close ally of both the EU and the US traps it between two opposing economic strategies.

The UK government has yet to comment on how it plans to navigate these potential challenges, but businesses are bracing for renewed uncertainty in trade and energy markets.

This latest warning adds to growing concerns over the global implications of a Trump re-election and its impact on Britain’s post-Brexit economic strategy.