How Trump’s Protectionist Outlook Could Impact on UK Firms
While there may be some degrees of separation between the UK economy and the financial markets, these two entities continue to be bound by the macroeconomic climate and geopolitical developments.
This has been borne out recently, as the rise of protectionist politics in the U.S. and Italy continues to impact on everything from monetary policy to the strategies deployed by startups and SMEs in the UK. The actions of controversial American President Donald Trump are proving particularly impactful, as he continues to implement inward-looking policies that prioritise U.S. jobs and exports ahead of anything else.
In this post, we’ll explore this in further detail, while asking how Trump’s protectionist outlook is impacting on British business.
How is Trump Implementing his “America First” Approach?
While Trump has always talked about the value of a weak dollar and the implementation of tariffs on high volume imports, until recently he seemed loathe to translate this into direct policy. He finally made his move last week, however, announcing that the U.S. will start to impose a 25% tariff on all steel imports and a further 10% on incoming aluminium shipments.
This represents the embodiment of Trump’s protectionist agenda, as he looks to boost American industry and created thousands of jobs in the so-called “rust states” in America’s Midwest. As observed by Richard Parry of Hantec Markets, however, this represents a huge concern for global growth, with trade tariffs likely to restrict trading volumes throughout the world.
In simple terms, the implementation of seemingly punitive (and not to mention significant) tariffs by the Trump administration is likely to trigger a similar response from America’s trade partners. Canada (who currently import 16% of their steel into the U.S.) will probably introduce tariffs on U.S. steel and similar imports, for example, while Japan and the EU may also follow suit and usher in a debilitating trade war.
How will this Impact on British Firms?
This is a prospect that could be extremely damaging to the UK, even though they’re unlikely to become embroiled in any trade war with the U.S.. After all, Britain is facing an uncertain future as the Brexit deadline of March 29th, 2019 continues to loom large, with Theresa May’s government having identified a lucrative trade deal with the States as being key to their long-term prosperity.
Not only this, but the U.S. remains the UK’s second largest trading partner after the EU in the current economy. In fact, America is also Britain’s second largest export market, accounting for 19% of all outgoing products during 2016/17. An estimated 11% of our imports came from the U.S. during the same period, with only the EU contributing more (53%).
With this in mind, it’s clear that Trump’s protectionist approach could restrict trade between these two countries, while the implementation of tariffs will also reduce the value of any products sold into the U.S..
From the perspective of individual firms, Trump’s policies are already beginning to have a direct impact. The pound sterling (GBP) has held firm against the U.S. Dollar (USD) at 1.3940 in recent times, for example, while there has also been a large upgrade to the GBP:USD projections in March.
This is reflective of Trump’s ethos, as the weaker dollar will make U.S. exports more competitive and help to stimulate industry on the other side of the Atlantic. Over time, this may diminish the demand for more expensive imports from the UK, whilst striking a blow to the turnover generated by individual businesses.
be intact with GBP/USD seen at 1.3940.
You may be interested
Here Are 5 Important Uses For Printed Circuit BoardsAlton Elliott - May 30, 2020
Printed circuit boards are vital components in many electrical devices. They play the role of connecting electrical components in a…
Are electric scooters legal in Ontario? The answer is, yes!David Willy - May 29, 2020
Starting from January 1, 2020, a five-year pilot project is launched in Ontario allowing the use of electric scooters on…