Analysts have warned that Donald Trump’s tariffs could cost UK industry $3bn (£2.5bn) a year.
A new analysis from Boston Consulting Group shows that industries such as automobiles, aerospace, pharmaceuticals and machinery will be hardest hit by the proposed 20% tariff on U.S. imports.
While expected growth in sales of services such as banking will offset some of the overall economic impact, the data highlight the risks to the UK from Trump’s looming trade war. The Center for Economics and Business Research (CEBR) has previously warned that trade barriers could reduce UK gross domestic product (GDP) by 0.9% by the end of the Trump administration.
It is hoped that the “special relationship” with the United States will mean that the UK can escape the worst tariffs in Trump’s plan. However, UK industry would be hit hard if additional tariffs were imposed.
Manufacturers have complained that their international competitiveness is being hit by the country’s painfully high energy costs, according to industry group Make UK. The group blames the UK’s race for net zero emissions for making electricity more expensive.
“UK industrial energy prices as a factor of production have long been higher than those of continental Europe’s closest neighbours,” MakeUK and PwC said in a report published on Monday. “Part of this difference, particularly with the E.U. This is made up of higher costs associated with the transition to green energy at the supply level compared to other competitors.”
Make UK said more than 90% of manufacturing companies expect employment costs to increase. Imminent increases in employer national insurance contributions and the minimum wage were the most frequently cited reasons.
More than a third of manufacturers expect the economy to slow this year. However, the same share expects activity to accelerate, pointing to widespread uncertainty about the outlook.
The BCG report also predicts that trade with China will decline by 2.3% annually as the hostility of the United States and the European Union towards the world’s second-largest economy forces global supply chains to shift away from China.
The warning comes after Chancellor of the Exchequer Rachel Reeves visited China over the weekend in an attempt to strengthen economic ties with the communist country.
BCG forecasts that UK trade with Canada and Japan will also stall, but gas imports from the US and Norway are expected to rise significantly in the coming years.
A Treasury spokesman said: “We have tabled a Budget in Parliament to wipe the slate clean and provide the stability that businesses desperately need.
“The independent OBR confirmed it will deliver lower unemployment and higher wages over the coming years, with more than half of employers set to see a reduction or no change in their National Insurance bills. We are now focused on implementing our A program of change that will boost Britain’s build-up, unlock investment and support business so we can make things better across the UK.
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