Glasgow Social Sciences Hub

Blog by Dr Maha Rafi Atal, Senior Lecturer in Political Economy at the University of Glasgow

In recent weeks, the Trump administration has announced sweeping tariffs on steel and aluminum, imposing a 25% duty on imports from all countries. The administration also indicated plans to introduce country-by-country tariffs, targeting a broader range of products from states that employ VAT-based tax systems—potentially including the UK. While the European Union has responded withimmediate plans for retaliation, the UK has so far taken a "wait-and-see" approach.

While this trade war has echoes of Trump’s first term, the implications for the UK are new. That is because the UK was still a member of the European Union during Trump’s first term in office, and did not leave the EU customs union until 31 December 2020, just weeks before Trump left the White House. While in the customs union, the UK did not need—and was not allowed—to set its own trade policy. Since January 2021, the UK has been in the globally unique position of designing a new trade policy from scratch. Confrontation with a pugnacious Washington is an early test.

Trade in Chains

For the UK, the economic impact of the tariffs will be three-fold.

First, there are the direct effects of taxes on UK exports to the United States. If the UK is hit only with the steel and aluminum tariffs, the UK exports £400 million of these commodities to the US per year, representing only 5% of UK steel exports. If the Trump Administration targets the UK for country-specific tariffs, taxing all exports to the US, however, the blow could be more significant, a loss of between £22and £24 billion to the UK economy. This figure is lower than it could have been because a tariff on goods will exclude services, like finance, which form the majority of UK-US trade.

Second, there are the indirect effects of tariffs on the UK’s place in global manufacturing. Most trade today does not involve finished goods moving from one country to another.

Instead, two-thirds of trade takes place in “global value chains,” complex networks through which companies move the component parts of products between their own facilities around the world and those of their subcontractors. Many UK businesses supply components that are incorporated by companies overseas into finished goods ultimately destined for the US. These components would not appear on a record of UK-US trade, but if those finished products are subject to tariffs, this could affect demand for UK-manufactured components.

Third, global value chains will reorient in response to American trade barriers, as already took place in Asia during Trump’s first term. If businesses reroute their supply chains to avoid the US market, the UK could become a dumping ground for excess steel and aluminum that can no longer enter the American market. If major steel-producing nations like China can’t export to the US, they will look for alternative buyers, flooding the UK with cheap surplus metals and undercutting domestic producers.

War By Other Means

Trade tensions sometimes escalate into armed conflicts, but the Trump administration has explicitly framed its tariffs as a form of war by other means, invoking a national security exemption to World Trade Organization rules to justify its restrictions. This will be subject to legal challenge (as it was in the previous Trump term), not least because the tariffs will hit imports from countries—like the UK—who are security allies of the United States. While the US might be able to argue that relying on an adversary like China to supply its military equipment poses a threat, it will be hard placed to make the same case against members of NATO or Five Eyes. If the US truly wants to strengthen its defense industrial base, it makes little sense to impose economic barriers on its closest security partners.

While the EU prepares to challenge the “national security” logic of the tariffs altogether, coordinating with allies including Canada, the UK has held back. The UK plans to play along with the “national security” premise, and use it to protect UK interests. Both government officials and industry representatives have been quick to highlight that British steel is used in key US defense projects, including submarine and aircraft construction, and that specialized parts made in the UK for the US military that cannot be sourced from elsewhere. The UK government has also declined to join an international standards agreement on artificial intelligence which focused on AI ethics, siding with the US government’s position that restrictions should, like restrictions on trade, focus narrowly on “national security.”

The UK’s envoy to the US, Peter Mandelson, has argued that the government can also use its acceptance of the Trump’s “national security” framing to negotiate for both exemptions to the tariffs for UK industry as well as for greater US support for Ukraine. Indeed, Lord Mandelson has argued that the UK could make a virtue of being “not Europe” in discussions with a Euro-skeptical United States.

With Friends Like These

The UK government also aims to re-negotiate its relationship with the European Union, hoping for new cooperation on security, trade and mobility. Yet this goal is in fundamental tension with the UK’s approach to the Trump administration.

The UK cannot successfully leverage its status as a “bridge” to Europe to plead for Ukraine while also positioning itself as “not Europe” to secure trade concessions for its own manufacturers. First, European governments have rejected the UK’s claim to represent the continent in the Ukraine talks, with French President Macron instead convening a regional summit last week, and making an emergency visit himself to Washington today—ahead of Starmer’s arrival later in the week—to present the European position. Second, the UK publicly snubbing European allies in negotiations with the US diminishes the EU’s willingness to entertain UK requests for closer ties.

Second, choosing to prioritize appeasing the Trump administration over a united front with the EU does not make sense as a matter of economic policy. The UK exports three times as much steel and aluminum to the European Union as it does to the United States, and the EU is by far the largest market for UK goods overall).  

Moreover, the EU is moving forward with its own trade restriction, a Carbon Border Adjustment Mechanism (CBAM), which imposes tariffs on imports that don’t meet European environmental standards. The UK will adopt a similar system in 2027, aligning itself with Europe to secure smooth UK access to critical commodities. While the Biden Administration was in discussions about a plan to bring the US into this “climate club,” the Trump Administration is rapidly reversing US climate commitments. Indeed, the Administration has singled out countries imposing regulatory tariffs as potential targets for its country-by-country tariffs. As a result, by 2027, the UK will face a binary choice between regulatory alignment with (and market access to) Europe and a trade confrontation with the United States. The current “wait-and-see” approach prolongs, but does not resolve, this dilemma.

Author

Dr Maha Rafi Atal, Senior Lecturer in Political Economy at the University of Glasgow. 

Maha takes a political economy approach to the study of corporate power. Her current book project, examines “corporate social responsibility” as a system of Company Rule, tracing its history from colonial trading corporations to contemporary multinationals. She is also interested in how corporations exercise influence in the media and in politics, in the political power of internet platform companies, and in corporate accountability under international law. Maha is an award-winning business journalist, with work published in Forbes, Fortune, BusinessWeek, The Washington Post, The Guardian, and The New Statesman, among others.

This blog was originally posted on the Centre for Public Policy website.

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First published: 25 February 2025