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Donald Trump’s threatened tariffs on all US imports could hit the UK’s transatlantic-trade as badly as Brexit affected trade with the EU, a leading think tank has warned.
Trump is threatening tariffs as high as 10-20% – with even steeper rates for goods from China, Mexico and Canada – rivalling the scale of non-tariff barriers that Brexit imposed on goods sales to the EU, according to a new study by the Resolution Foundation.
Brexit has had a devastating effect on the UK goods exports with some studies estimating the UK’s goods trade is around 30% lower with the EU since the UK left the customs union and single market.
Food and drink is one of the worst affected with the UK Trade Policy Observatory calculating in February that agrifood exports are down 18% since the UK-EU trade deal and “show no sign of recovery”.
The picture is particularly stark for small businesses who have cut goods sales to Europe by 30% since Brexit, while 20,000 companies have stopped exporting to the continent altogether, according to the Centre for Economic Performance in June.
The Resolution Foundation found goods exports have grown by just 0.3% each year since 2019, well below the OECD average of 4.2%. “Brexit so far has turned out to be a tale of two sectors: while traded services have held up surprisingly well, Britain’s goods trade has proved vulnerable,” the think tank said.
The knock-on effects of Trump’s tariffs could be darker still if ‘super-tariffs’ on rivals such as China escalated into a truly global trade war.
“No longer part of a large trading bloc, the UK would then face sharp dilemmas in a scramble to retain access to overseas markets and its flow of imports,” it said.
In response to any barriers, the Resolution Foundation called on the UK to stick to EU standards, “even if this could complicate or even reduce the (already low) chances of an attractive general US-UK Free Trade Agreement.”
“The least-bad option might be living with tariffs, while being measured and selective about any retaliation, so that Britain’s businesses and consumers continue to benefit from £58 billion of annual imports from the US.”
Keir Starmer rejected calls this week to prioritise the EU over a US led by President Trump. “Against the backdrop of these dangerous times, the idea that we must choose between our allies - that somehow we’re with either America or Europe - is plain wrong. I reject it utterly,” he told the Lord Mayor’s Banquet at Mansion House..
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