The UK has been caught in the crossfire of Donald Trump’s latest trade war, as the US President imposes sweeping tariffs on steel and aluminum imports. But the fallout could extend far
beyond metal manufacturers, with potential consequences for millions of British businesses and households.
Trump’s trade war: what’s happening?
President Trump has imposed a 25% tariff on steel and aluminum imports, part of his broader "America First" economic policy. The move is designed to reorder global trade in America’s favor, with Trump arguing that the US has been disadvantaged by past trade agreements.
While the White House claims these measures will boost American industry, they have sparked backlash from international allies—including the UK.
What are trade tariffs?
A tariff is a tax imposed on imported goods. It isn’t paid by the exporting company but by the importer, meaning businesses buying foreign products must either absorb the extra cost or pass it on to customers.
For example, if a UK company sells steel to the US for £100, a 25% tariff increases the total cost to £125 for American buyers. This makes UK steel less competitive in the US market.
Why is Trump using tariffs?
Trump has used tariffs as a negotiation tool, pressuring other countries to comply with US trade demands.
Targets: So far, he has focused on Canada, Mexico, and China, which together account for 40% of US imports.
Other Motivations: Trump has linked tariffs to other political concerns, accusing Canada and Mexico of failing to control migration and drug production.
Although controversial, this aggressive trade strategy has seen some short-term successes. For example, Trump paused a planned 50% tariff increase on Canadian steel after Canada agreed to cut energy charges on exports to US states.
How does this impact the UK?
- UK Steel Industry Under Pressure
Despite hopes for an exemption, the UK is now subject to the 25% steel and aluminum tariff. This means British steel exported to the US is now significantly more expensive, making it harder for UK manufacturers to compete.
While the tariffs apply to all foreign steel, UK producers say they are already disadvantaged by higher energy costs—making it even harder to remain competitive.
- Could More UK Exports Be Targeted?
At this stage, it’s unclear if Trump will extend tariffs to other UK goods. However, given his track record, there’s a risk the UK could face similar levies on other exports.
- The Global Economic Impact
Perhaps the biggest concern is how Trump’s trade war could damage the global economy. Trade barriers slow economic growth, making it harder for businesses to expand, hire workers, or raise wages.
Bank of England Governor Andrew Bailey has warned that tariffs could have a "substantial" economic impact on both the UK and the world. Professor Alan Taylor of the Bank’s Monetary Policy Committee echoed this concern, comparing trade disruptions to past economic crises.
- Could This Lead to a Recession?
There is growing speculation that escalating tariffs could tip parts of the world into recession. The global economy is already fragile, and uncertainty surrounding trade could make businesses hesitant to invest.
Some experts even warn that Trump’s trade war could backfire and push the US into a recession, which would have a ripple effect on other economies, including the UK.
What about interest rates?
If tariffs hurt the UK economy, the Bank of England might consider cutting interest rates to stimulate spending. However, the Bank’s primary focus is still on controlling inflation, which remains above its 2% target.
Ironically, while the White House claims tariffs will help the US economy, some economists predict they could actually increase inflation in America—potentially forcing interest rates to stay high for longer.
Final thoughts
Trump’s trade war is already making waves, and UK businesses and consumers may soon feel the impact. If tariffs escalate, they could:
- Make UK exports to the US more expensive
- Slow global economic growth
- Increase uncertainty for businesses and investors
- Affect interest rates and inflation
With the UK economy already under pressure, these trade disputes add another layer of uncertainty. The coming months will be crucial in determining whether the UK can negotiate exemptions or if British businesses will have to absorb the financial blow. Photo by Gage Skidmore from Surprise, AZ, United States of America, Wikimedia commons.
