Could Trump’s Tariffs Affect Your UK Business?

Donald Trump’s recent sweep of trade tariffs promises could have seismic repercussions across the world, and not just for those directly affected. A simmering global trade war has seen some UK companies hike their prices already according to a new survey conducted by HSBC.

The report, that polled 1,500 UK businesses, found that 39% were already increasing their prices as a pre-emptive measure to the tariffs being introduced.

But what exactly are these changes and how could they affect companies on this side of the Atlantic?

What is Trump’s aim?

Trump has said that the implementation of these tariffs is “taking bold action” against the countries he claims are behind the use of the drug, fentanyl in the US. The Trump administration say that the chemicals used in fentanyl are from China, the labs that create it are in Canada, and the illegal gangs that supply it are from Mexico.

As such, these are the first countries that have had trade tariffs issued against them: 25% for both Canada and Mexico, and 20% for China.

However, Trump’s tariffs may not end there. He’s already stated his intention to impose a 25% tariff on all EU goods “very soon”, saying that the EU was formed to “screw the US”.

More may come in the coming months, with many nations worried they could be next in Trump’s firing line. The American president has made no secret of how much he loves tariffs claiming that “tariffs are the most beautiful words to me” [sic].

They remain a key element of his economic plans as a means of raising tax revenue and potentially increasing the nation’s manufacturing power.

Will the UK have tariffs imposed on it?

As with anything involving Trump, you can never say anything for certain. He’s previously said that the UK was “out of line”, but after meeting with Kier Starmer recently, he has since said that there’s a “very good chance” we could avoid a tariff being placed.

Analysts are hopeful that the UK could avoid tariffs from the US as we don’t have a trade deficit with them. Trump is not happy that some countries sell more to the US than they buy from them. The US has trade deficits with several countries, but the UK is one of the few that they actually enjoy a trade surplus with.

Even this is contentious, however. While American figures tell of a trade surplus with the UK, British figures show that they have a trade deficit with us instead. Between the two, there is little difference in actual numbers. They’re close enough to call them roughly balanced.

What happens if the UK does have a tariff enforced on its goods?

It’s a big worry for certain sectors. The automotive, agricultural and Scotch whisky industries, in particular, would be heavily affected by any tariffs. The majority of what Britain sells to America, though, is consultancy work, which wouldn’t attract any trade tariff.

Will the UK be affected even if we don’t have a tariff enforced?

It’s likely, although exactly how is still debatable.

With so many countries involved and implementing their own retaliatory tariffs against the US, global inflation is a real possibility. Several studies looking at tariffs introduced during Trump’s previous term in office showed that the main effect was that companies simply passed on these costs to their customers, raising the cost of living of the average American.

The National Institute of Economic and Social Research (NIESR) predicts that resultant global interest rates rising could hit UK economic growth. They estimate that UK GDP could be up to 3% lower over the next five years, and 0.7% lower this year alone. Once Trump had the tariffs put in place, the FTSE 100 dropped from a record high the day prior, to fall by 1.2%

The cost of certain imports from the US could well be higher for us too. Several manufacturers have supply chains that cross Canadian and Mexican borders. Several car manufacturers, for example, utilise supply chains that cross these borders several times, incurring tariff costs not every time they re-enter the country, but also when they leave, thanks to retaliatory tariffs. By the time that these are exported to the UK, there will be several tariff costs that will likely be passed on to the end customer.

Does your company import or export overseas?

If you think your business might struggle to navigate the potential price rises these tariffs could incur, you should try to get ahead of the situation as soon as possible.

We have specialists on hand that can help you to facilitate turnaround strategies, restructure, sell or even close down your company depending on the best route available to you. Call us on 0800 975 0380, or email advice@forbesburton.com for a free consultation.