Trump’s Trade War Could Benefit the UK
The global markets experienced increased volatility this week after U.S. President Donald Trump confirmed his plans to impose tariffs on imports from three of America’s largest trading partners.
On Monday, Trump agreed to temporarily suspend 25% tariffs on imports from Mexico and Canada for 30 days, following agreements from both countries to take action on curbing opioid fentanyl trafficking into the U.S.
However, there was no pause for China, which is facing 10% tariffs, and in response, China has imposed retaliatory tariffs of up to 15% on U.S. goods.
Beyond that, European economies are also at risk from Trump’s tariff policies. The U.S. president stated on Sunday that tariffs on the EU “will definitely happen,” though he added that a deal could be worked out with the U.K., which has a more balanced trade relationship with the U.S.
“The U.K. is out of line. But I’m sure that one, I think, that one can be worked out,” Trump remarked, expressing that he was “getting along very well” with U.K. Prime Minister Keir Starmer.
Starmer confirmed this week that he had discussed trade with Trump, but clarified that the U.K. would not choose sides between the U.S. and the EU, according to The Guardian.
U.K. Finance Minister Rachel Reeves also stated last month that the U.K. is “not part of the problem” regarding the trade deficits Trump aims to address with his tariff strategy.
According to official data, the U.S. was the U.K.’s largest trading partner in the year ending in September 2024, accounting for over 17% of total U.K. trade.
While there is some fluctuation in the numbers, what matters most to Trump is that trade between the two countries is almost balanced—something that is significant to him, as he dislikes when the U.S. exports less than it imports from other nations.
As the British economy struggles, with Reeves mentioning her efforts to “kick start” growth, some analysts suggested that the U.K. could actually benefit from Trump’s trade war.
Service-Based Economy
Irina Surdu-Nardella, an international business professor at Warwick Business School, explained that even if the U.K. faces tariffs, the impact may be less significant than expected.
“The effects on the U.K. market would be relatively limited to industries like fishing and mining,” Surdu-Nardella said. “The service-focused nature of the U.K. economy shields it significantly from tariff consequences. Tariffs usually hurt industries with complex supply chains where goods cross borders multiple times. The U.K., however, primarily exports banking and consultancy services to the U.S.”
The U.K.’s top five goods exports to the U.S. include cars, medicines, mechanical power generators, scientific instruments, and aircraft, amounting to £25.6 billion ($31.8 billion). These pale in comparison to the £109.6 billion in services exports, including financial services and insurance.
A Unique Position
Neri Karra Sillaman, of Oxford’s Said Business School, suggested that avoiding tariffs would be ideal for the U.K., potentially boosting its core industries.
“If the U.K. remains tariff-free, it could attract investment, talent, and new trade partnerships,” Sillaman noted. “Tariffs could push businesses to seek more cost-effective hubs, making the U.K. a gateway for companies trying to avoid restrictions. Sectors like luxury goods, pharmaceuticals, and advanced manufacturing could see increased investment and trade opportunities.”
The U.K.’s automotive, aerospace, and financial sectors might also benefit if U.S. buyers begin to look for alternatives to tariff-hit suppliers.
“We’ve seen this before—trade wars shift the global economic balance, and this could be an opportunity for the U.K. to capitalize on that,” Sillaman added.
A Potential Safe Haven
Alex King, former FX trader and founder of Generation Money, agreed that Trump’s policies could offer economic relief to Britain.
“When the U.S. first imposed tariffs on China, Chinese manufacturers rerouted goods through countries like Vietnam and Thailand to avoid tariffs,” King explained. “If the U.K. avoids tariffs, it could benefit similarly, especially with goods from the EU.”
King also suggested that the British pound could benefit from the situation, noting that after Trump’s tariff announcements, the pound rose against the euro, Canadian dollar, and the currencies of Australia and New Zealand.
“This indicates global investors may view the U.K. as a potential safe haven,” he said. “The U.K. could become one of the few major economies with tariff-free access to both the U.S. and the EU, making it—and the pound—a potential winner.”
The Place to Be
Dan Boardman-Weston, CEO of BRI Wealth Management, emphasized that the U.K. has a “fighting chance” of avoiding U.S. tariffs, making it an attractive option for investors.
“If Trump goes ahead with tariffs on other countries, more goods may end up in the U.K., which could lower inflation,” Boardman-Weston said. “Increased investment into the U.K. is likely if tariffs worsen and become more permanent.”
With interest rates expected to fall faster in the U.K. than in the U.S., British companies could see a revaluation, and the U.K. might attract more investments.
“The U.K. is the place to be overweight for 2025,” he added.
This shift in the U.K.-EU dynamic is significant, according to Chris Metcalfe, CIO at IBOSS Asset Management.
“Trump’s tariff policies may seem erratic, but it’s hard to imagine him reversing course and imposing tariffs on the U.K. instead of the EU,” Metcalfe said. “This could create a positive environment for attracting U.S. companies and investment into the U.K., especially with the political instability in France and Germany.”
