UK to Largely Avoid U.S. Tariff Troubles, Say Economists: Reuters Poll
The United Kingdom is likely to sidestep significant economic challenges stemming from potential U.S. tariffs next year, with economists predicting minimal impact on the British economy, according to a recent Reuters poll. A strong majority of the 23 economists surveyed anticipate U.S. President-elect Donald Trump will impose tariffs of less than 10% or none at all on UK imports, offering some relief amidst global trade uncertainties.
This outlook contrasts with broader concerns about the European Union, which remains more vulnerable to U.S. trade policies. A similar poll conducted last month suggested the EU could face more significant repercussions due to its larger reliance on goods exports, which are expected to bear the brunt of any new tariffs.
UK’s Resilient Position in U.S. Trade Relations
Economists attribute the UK’s relatively favourable position to the composition of its trade with the United States. While one-fifth of Britain’s total trade involves the U.S., only about one-third of its exports are goods—sectors most likely to face tariffs under Trump’s proposed trade policies.
Furthermore, the differing methodologies of the U.S. and UK statistics agencies have led both countries to report trade surpluses with each other in goods, which could help mitigate the risk of steep tariffs. “Without the broader complexities of the EU trading bloc, the UK will be somewhat more flexible in reaching a negotiated settlement with President Trump,” noted James Rossiter of TD Securities.
More than 80% of respondents, or 19 out of 23 economists, predicted that U.S. tariffs on UK imports would remain below 10% or be waived entirely. Four economists forecast zero tariffs, while only a small minority expected tariffs in the 10-20% range.
Limited Economic Impact Predicted
The potential tariffs are expected to have a negligible effect on the UK economy. Of the 25 economists polled, 20 said the tariffs would be insignificant, offering good news for Prime Minister Keir Starmer’s government, which has pledged to focus on economic growth. Only four economists forecast a significant impact, while one suggested there would be no effect at all.
“The UK is relatively well-positioned to withstand the repercussions of President-elect Donald Trump’s proposed trade tariffs,” commented Stefan Koopman of Rabobank. “Surely, as an open economy, the UK will inevitably feel the impact of a trade war, but likely to a lesser extent than countries that are heavily dependent on manufacturing and goods exports, such as Germany.”
Inflation and Monetary Policy Considerations
While tariffs remain a critical issue, inflationary pressures in the UK present another challenge. British inflation jumped to 2.3% in October, up from 1.7% in September, prompting the Bank of England (BoE) to maintain a cautious monetary policy stance.
Megan Greene, a member of the BoE Monetary Policy Committee, noted last week that it remains too early to gauge the exact impact of potential U.S. tariffs on the UK economy. “None of us know exactly what those tariffs might look like. We can’t even work out which direction tariffs would push inflation, in particular in the UK and also in the eurozone to some degree,” Greene said.
The BoE is expected to hold its Bank Rate at 4.75% during its upcoming meeting on 19 December, with economists forecasting gradual rate cuts over the next year. The median forecast anticipates a reduction of 25 basis points per quarter in 2025, bringing the rate down to 3.75% by the end of the year.
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Broader Trade Challenges Remain
Despite the optimistic outlook regarding U.S. tariffs, the UK faces ongoing challenges in balancing its relationships with major trading partners. The European Union remains Britain’s largest trading partner, and rebuilding strained ties with Brussels remains crucial as the UK seeks to navigate post-Brexit realities.
Simultaneously, London must work to maintain strong relations with Washington, especially as a new U.S. administration takes office. Economists suggest that the UK’s trade surplus in goods with the U.S. could provide some leverage in avoiding steep tariffs.
Looking Ahead
As the global trade landscape continues to evolve, the UK’s ability to adapt to potential shifts in U.S. trade policy will be critical. However, with predictions of minimal economic fallout from U.S. tariffs, Britain appears poised to weather this particular challenge with resilience.
For Prime Minister Starmer’s government, the focus remains on fostering economic stability and growth, ensuring that the UK remains an attractive trading partner on the global stage. With minimal tariff troubles on the horizon, the path to achieving these goals may be clearer than previously anticipated.
