Donald Trump’s return to the White House is set to disrupt global markets and could significantly impact UK businesses. With his trademark “America First” policies, including tariffs and widespread deregulation, Trump's second term as president poses challenges and opportunities for UK businesses.
So, what can UK businesses expect from the next four years of a Trump presidency?
Donald Trump’s deregulatory agenda and economic-first approach are no secret - and this isn’t limited to US domestic products, but extends to the global export market.
During his 2024 campaign, he referred to tariffs as “the most beautiful word in the dictionary.” In fact, his 2016-2020 administration’s use of tariffs reshaped international trade relationships, and his second term is expected to follow a similar trajectory.
Recent proposals from Trump’s campaign indicate a 25% tariff on all goods from Canada and Mexico and a 10% tariff on imports from China. Whether this is good or bad for UK exports to the US depends on whether similar tariffs will be applied to UK goods: The National Institute of Economic and Social Research predicts that higher tariffs could lead to a £21.5 billion loss for the UK economy in 2025, alongside a 0.8% drop in GDP growth.
Clearly, the UK, as the largest exporter of goods to the US, risks significant disruption. In 2023, UK exports to the US totalled £60 billion, a vital component of the economy. To mitigate these impacts, UK exporters might consider diversifying by expanding into new markets or investing in cost-reduction strategies where possible. For example, automating labour-intensive production processes or sourcing alternative suppliers could help to buffer our businesses against potential losses.
Certain UK sectors are particularly vulnerable to Trump’s impending trade policies. The automotive industry, where the US is the second-largest market for UK car exports, faces steep challenges in particular. Eight out of ten cars manufactured in the UK are exported, making the sector highly sensitive to tariff increases. Luxury vehicle manufacturer Aston Martin, already grappling with past tariff impacts, exemplifies the stakes.
Similarly, the whisky industry (the US being the largest market for its UK exports in 2023) is also likely to feel the pinch. During Trump’s first term, this sector experienced difficulties due to retaliatory tariffs, and further disruptions could be on the horizon. Compounding these challenges is the UK’s refusal to accept chemically modified American agricultural products, such as fresh genetically modified fruit and vegetables or chicken washed in chlorine. The concerns are that adhering to these different US standards could put animal welfare and hygiene at risk, which is a sore sticking point in trade negotiations.
Other vulnerable sectors include pharmaceuticals and aerospace, which rely heavily on US demand and could face increased competition if tariffs are imposed. Businesses in these industries might begin to seriously consider investing in lobbying efforts and exploring alternative trade agreements to safeguard their interests in an increasingly uncertain environment.
Trump’s economic strategies focus on unfettered spending and deregulation, fueling the US market growth. For UK investors, this translates into mixed outcomes.
On one hand, surging US equities could bolster portfolios heavily invested in American assets. On the other, heightened inflation and rising bond yields could erode the value of defensive investments. This essentially means that the volatile investment landscape necessitates proactive portfolio management to balance potential gains against risks.
UK financial institutions are no doubt preparing for potential regulatory changes that could influence cross-border financial services. Leveraging fintech innovations and strengthening US partnerships could prove advantageous in this evolving landscape.
The UK’s ability to navigate these challenges hinges on maintaining its “special relationship” with the US. Prime Minister Sir Keir Starmer faces a delicate balancing act in this respect. Still, more recently, he has made efforts to strengthen the relationship but public criticism from Elon Musk, who is to lead the new Department of Government Efficiency, has undermined this. Trump’s protectionist agenda may add complexity.
For the UK, the task is to convince Trump that supporting British trade aligns with US interests. Experts suggest that Trump’s focus on reshoring American manufacturing might soften if economic calculations reveal the mutual benefits of free trade with the UK. The government’s diplomatic team, led by Ambassador Dame Karen Pierce, is working to secure agreements that minimise the costs of UK exports to America while preserving access to this crucial market - the outcome for which is likely to be crucial.
Trump’s return to The Oval Office signals a period of significant change for UK businesses. While his policies may offer opportunities for growth in some areas, the risks of tariffs, market volatility, and sector-specific challenges cannot be ignored.
By fostering a resilient, adaptable approach and strengthening diplomatic ties, UK businesses can navigate the uncertainties of this new era. Businesses should prepare contingency plans, enhance supply chain resilience, and explore emerging opportunities in less tariff-sensitive sectors.
Only by staying proactive can UK companies thrive amid these challenges. To take action, get in touch with our expert team today.
