Introduction
Donald Trump entered The White House at the end of January this year, and since this date, the days without his name in the headlines have been few and far between. Understandably, the leader of the most powerful country in the world will make headlines. Still, between changing the name of a gulf and labelling Gaza as a real estate opportunity, he has certainly not played it safe. The most recent and globally significant development Trump has enacted is the global tariffs he is implementing. Such tariffs are different between nations and international groups from a blanket 25% to Canada, Mexico (Canada and Mexico are on temporary exemptions), and the EU, 20% to China, and 25% globally on steel and aluminium (York, 2025). Other than the metals, the UK has avoided the brunt of the sanctions, as these two commodities are a small fraction of our exports to the US. However, global response from governments and markets has been less than favourable; understandably, governments rushed to impose counter-tariffs, and markets plummeted due to uncertainty. By the market close on March 10, the S&P 500 (an index which tracks the 500 largest companies traded on the market) dropped to its lowest levels since September 11, 2024. The index fell 8.6% from its peak on February 19, 2025 (US Bank, 2021). These drops wiped out almost all the gains the index had made since November 24.
It's fair to say that Trump's first couple of months have been turbulent, but how will this affect the UK? Will we be a bridge between America and Europe, or will we suffer under Trump's authoritarian rule like so many others?
Overview of Trump's Tariffs
In Trump's previous term in office, he imposed similar tariffs on many products and nations, affecting products valued at $380 million. Regrettably, this round of tariffs is much larger and may affect products to a value of $1 Trillion or $1.4 Trillion once Canada's and Mexico's exemptions expire (York, 2025). Intuitively, the effects of this round of tariffs will be significantly larger than the last, which could be unfortunate for the global macroeconomy. The Tax Foundation, a non-profit for research and tax analysis, found that 2018-2019 trade war tariffs imposed by Trump and retained by Biden reduced long-run GDP by 0.2%, the capital stock by 0.1%, and employment by 142,000 full-time equivalent jobs just in the US (York, 2025). Therefore, going by track record, the impact of these tariffs does not look favourable for the US. On the other hand, the tariffs are also a tax on each country/product they are applied to, leading to bad economic outcomes for them, too. The apparent result of tariffs on your output is that the demand for it will be reduced, therefore decreasing your revenue and damaging businesses. However, there are also retaliatory effects to consider, such as a counter-tariff.
Potential for Global Recession and Inflation
The global trade war that Trump has kicked off could contribute to a global downturn in the economy and possibly even a recession. One of the direct effects of tariffs is inflation; this is because by placing a 25% tariff on a good such as steel, that steel instantly becomes 25% more expensive, and the purchasers of this steel are forced to change suppliers or pay the higher price. This is the case for many American consumers and businesses, as well as other countries worldwide, who are now placing tariffs back on American goods. This, in turn, fuels global inflation and reduces global demand as the money in people's pockets is forced to stretch further for the exact same goods/services. Inflation such as this affects not only the demand side but also the supply. As input costs are driven upward, business margins are squeezed, leaving less money to use for further investment and hiring, again slowing economic growth.
Direct Impact on the UK
Looking at the UK specifically, only the steel and aluminium suppliers will be directly affected by the 25% tariff. Therefore, industries reliant on exporting these supplies may experience reduced demand, causing a loss of revenue and increasing pressure on businesses. However, this export market is expected to be worth only $700m, a fraction of our total exports (Silva, 2025). These tariffs could, in fact, benefit UK markets with lower costs because goods previously sold in the US markets are taken elsewhere, flooding these markets and putting downward pressure on prices (Silva, 2025). Although unlikely, the possibility of counter-tariffs on US goods in the UK is worth mentioning, as Trump is less than amenable with any foreign nation; therefore, Starmer may be required to place such tariffs as a bargaining chip. The effects of this will be the same as I mentioned earlier: inflationary pressure slowing growth. However, the main issue for the UK is the global uncertainty that we are currently experiencing, it is visible that the markets are wary about the future, and this is sucking growth from the economy.
Broader Economic Implications and Responses
Uncertainty has been a common word in the world since COVID struck, and Trump has only exacerbated this feeling. The inflationary pressure of these tariffs comes with reduced consumer and investor confidence, leading to a slowdown in spending and, therefore, growth. Before Trump's actions, the economy was not performing too well, and although the effects of the tariffs won't be felt immediately, the expectations and recession fears of consumers will. People will be less confident about going out and spending, so sectors such as retail and service will feel this squeeze. Furthermore, investors have shown a drop in confidence; this was clear from the stock market, which lost almost 4 months of gains in a very short window. Hopefully, these tariffs are bargaining chips, and this seems to be the case as many have been put on hold by Trump to allow for trade discussions between nations. Starmer said that the UK would take a "pragmatic approach" and "all options are on the table" (Sky News, 2025), but it is unlikely he will strike back with anything which could damage relations as, in comparison, the effect on our nation is minimal.
Conclusion
Today's economies are highly interdependent, as over the last 70 years, there has been relative global peace, which has allowed for mass globalisation. This meant that tariffs such as the ones Trump has imposed came as such a shock to the markets. Many developed economies are tiptoeing the line of recession, and this announcement will likely hinder the chances of escaping it unless negotiations are held and agreements are made in good time. Like the wars, negotiations and trade will likely take the headlines for the coming months, and it is key for businesses to stay aware of new developments. While the tariffs may not directly affect most of us in the UK, there are many indirect effects which we are likely to feel, such as a loss of confidence and a reduction in spending; therefore, vigilance and awareness are key.
Reference list
Silva (2025). UK seeks US trade deal as Donald Trump's metal tariffs take effect. BBC News. [online] March 12 Available at: https://www.bbc.co.uk/news/articles/cx2r3md0j84o [Accessed March 20. 2025].
Sky News. (2025). What are Donald Trump's tariffs - and how will they affect the UK? [online] Available at: https://news.sky.com/story/how-trumps-tariffs-will-affect-the-uk-13300714 [Accessed March 20. 2025].
US Bank (2021). How Far Will the Market Correction Go? | US Bank. [online] www.usbank.com. Available at: https://www.usbank.com/investing/financial-perspectives/market-news/is-a-market-correction-coming.html [Accessed March 17. 2025].
York, E. (2025). Tracking the Economic Impact of the Trump Tariffs. [online] Tax Foundation. Available at: https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/ [Accessed March 17. 2025].
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