The possibility of Donald Trump threatening punitive trade tariffs on the UK over some as-yet-unarticulated grievance is a serious possibility. After all, he has already threatened Denmark with such measures over their reluctance to sell Greenland to the US. As I wrote in a blog post on that subject ('How Denmark Should Handle Trump’s Trade Threat Over Greenland'), Denmark doesn’t rely heavily on US trade, rendering Trump’s threat a paper tiger. But how damaging would a similar situation be for the UK?
After looking into this, I think that while it would be a nuisance, it wouldn’t be a major one. Trump’s protectionist trade policies have targeted allies and competitors alike when he perceived US interests to be at stake. A hypothetical trade threat against the UK could be triggered by various issues—such as a UK alignment with EU regulatory standards, which he might interpret as undermining US trade interests.
The US is an important trading partner for the UK, with trade totaling around £200 billion annually. However, the UK’s economy is well-diversified, with strong trading relationships beyond the US. While trade with the US is significant, 42% of UK exports go to the EU, and another 58% to the rest of the world, including markets in Asia, the Commonwealth and the Pacific region. This broad range of trading partners reduces reliance on the US.
I think the UK could survive a US trade blockade as it did the COVID-19 pandemic, which saw the UK economy shrink by 9.3% in 2020, a higher percentage than that of the total contribution of US trade to the UK GDP which is 5.9%. Despite this, the UK weathered the storm and recovered quickly.
So a trade blockade from the US would not cause a nationwide shutdown of economic activity. Instead, its impact would be localised to certain sectors, such as financial services, pharmaceuticals and Scotch whisky exports. While these industries would experience some disruption, the rest of the economy would not.
Given this, my advice to the UK government is to remain confident, knowing that should Trump ever threaten a trade blockade, the potential damage would be minimal.
