US trade tariffs imposed by Donald Trump could have a significant impact on the UK economy. The tariffs, which will apply to imports from Canada and Mexico, and increase tariffs on Chinese goods, are likely to lead to a general slowdown in global trade volumes, depressing economic growth.
The UK’s open economy makes it particularly vulnerable to these effects. Rising gilt yields due to increased inflation concerns could also push up the cost of borrowing for the UK government, making it harder for Chancellor Rachel Reeves to meet her self-imposed fiscal rules.
This could prompt Reeves to make cuts to future spending plans. The impact on the FTSE 100 index is expected to be negative, with trading suggesting a potential fall in value. The UK’s plans to negotiate a closer relationship with the EU may also become increasingly difficult due to the US tariffs and potential retaliation from Brussels.
The EU is the UK’s largest trading partner, and any trade barriers erected by the US could limit the UK’s ability to avoid picking sides. Reeves’ recent visit to China was an attempt to signal openness to trade, but the US may demand that allies join it in erecting barriers against competition from Beijing.
Research suggests that a 20% tariff on UK exports to the US could lead to a £22bn reduction in exports, with the hardest-hit sectors including fishing and mining. However, most of the UK’s services exports to the US are not subject to tariffs.
Source: https://www.theguardian.com/business/2025/feb/02/how-donald-trumps-trade-tariffs-could-affect-the-uk