Trump Tariffs Expected to Have Minimal Impact on UK Economy | Financial News

December 12, 2024 TruthUSA

Donald Trump’s plans to implement sweeping tariffs on all imports to the US are predicted to have an “insignificant effect” on the UK economy, as indicated by a survey of international economists.

As officials at the Bank of England worry about the consequences of potential tariffs up to 10% on UK products and the possibility of a global dispute, a Reuters study suggested that the UK might even be excluded from these fees entirely.

The reasoning behind this, as the news agency reported, lies in the fact that the incoming US president intends to focus on addressing US trade deficits with other nations and trading blocs.

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With the UK now out of the European Union, both the UK and the US report surpluses in goods trade with one another.

Another significant reason cited for the UK economy potentially being less affected is that the majority of its trade with the US is in services rather than in goods.

However, the same is not necessarily true for eurozone countries.

A similar survey conducted last month indicated that the eurozone would be more adversely affected collectively due to their goods-oriented trading relationship with the US, with potential repercussions impacting growth for as long as three years.

Even before Mr. Trump assumes office, the European Central Bank is anticipated to counter a projected economic decline by reducing interest rates for the third time later this Thursday.

The eurozone’s manufacturing leader, Germany, is already experiencing a downturn in demand for many essential goods, including cars, which has resulted in upcoming snap elections.

The president of Germany’s central bank has cautioned that its economy could “slip into negative territory” should Trump’s tariffs come into effect.

France is also facing political stagnation that has raised concerns about its public finances.

Mr. Trump has signaled his intent to implement these sweeping tariffs starting the first day of his presidency next month, claiming they are necessary to safeguard American jobs.

How US trading partners react will be critical and will place Prime Minister Sir Keir Starmer in a delicate position.

One-fifth of all UK trade is conducted with the United States.

Nonetheless, the UK’s largest trading partner remains the European Union, notwithstanding Brexit.

The government has begun initiatives to mend relations, which includes loosening trade restrictions with the bloc, but it may soon have to take a definitive side in any impending trade conflict.

Four out of the economists surveyed by Reuters believed that the UK would be entirely exempt from the anticipated 10-20% US import tariffs.

China, Canada, and Mexico are expected to face even more substantial tariff increases.

Stefan Koopman from Rabobank remarked on the situation: “The UK’s position is relatively secure to handle the consequences of President-elect Donald Trump’s proposed trade tariffs.”

“Certainly, as an open economy, the UK will feel the impact of a trade dispute, but it is likely to a lesser degree compared to countries heavily reliant on manufacturing and goods exports, such as Germany.”

Economists have broadly cautioned that Mr. Trump could inadvertently boost US inflation by increasing tariffs, as the higher costs of imported goods would eventually be transferred to consumers.

While inflationary pressures are precarious in the US, the UK is in a somewhat similar predicament.

The Bank of England is expected to maintain the Bank rate at 4.75% next week after two reductions in borrowing costs this year.

Officials remain concerned about the impact that increased trade tariffs could have on UK inflation, which is projected to rise from a current annual rate of 2.3% to 2.6% next week.

Nonetheless, barring any unforeseen economic shocks, economists and financial markets predict the Bank may implement four interest rate cuts next year.

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