Trade Wars & The Future of UK-US Trade

The terms “tariffs” and “customs duty” have been used more by the general public in 2025 than they have since the Brexit argument days.  Even back then, the concerns were never solely about tariffs but were mixed with issues on sovereignty and immigration, among other things.  

Media around the world are reporting daily on the latest tariff regime being introduced by the United States’ newly inaugurated Republican Government and have thrust the subject of Customs Duty into the global spotlight like never before.

At present, the situation is changing on a daily basis, and no one can accurately predict the impact the changes might have on global trade, whatever they may end up being. In all likelihood, an article about the current situation would be out of date within days of publication so instead, our focus on is using this as an example to better understand what a trade war is and its wider implications may be.

The current situation sees the rest of the world watching with bated breath, as new tariff penalties are being imposed by the US on hand-picked regions and products, which they say are designed to encourage improved border control or balance the impact of imports into the US market. Some of these changes have resulted in reciprocal reactions and whilst the pendulum continues to swing back and forth, UK traders sit on the side-lines assessing any potential impact that might ripple in our direction.

Thankfully, the UK’s special relationship with the US saw a very successful meeting between Donald Trump and Sir Kier Starmer in Washington at the end of February and brought with it hopes that a mutually beneficial trade deal may be within reach for the UK and the US.

However, as always, there are many external political factors happening around the world that could affect the progress of a positive trade deal between the UK and the US. We watch and wait with fingers and toes crossed, in the hope that none of them influence any potential deal negatively, whether directly or indirectly.

US tariff changes 

4th March 2025 (the day before the release of this edition) saw the introduction of increased tariffs by the US on Canada, Mexico and China (including Hong Kong), with Canada and Mexico seeing their tariffs increase by 25% and China suffering a further increase of 10% tariff against their goods, in addition to the initial 10% announced in February, bringing their total increase to 20%.

As expected, these changes have not been well received, and all 3 countries have or will impose retaliatory measures of their own.

Canada responded immediately with reciprocal 25% tariffs on US goods, China chose a 15% increase on many US agriculture and food products and as we go to print, Mexico plans to declare their reciprocal increases on Sunday 9th March.

The US have also announced an imminent 25% increase on steel and aluminium imports from 12th March 2025, globally, which will affect the UK directly.

In addition, also under threat of 25% tariffs is the EU. The trade deficit that the U.S. currently has with the EU has been quoted as the reason for the tariff increases with one of the key talking points being the US’s assertion that EU VAT is akin to another unfair cost for U.S. exporters. As we go to print, the EU increase has not yet materialised.

Impact on the UK

For UK businesses specifically, the most pressing concern is the imminent 25% tariff that the US intends to impose on steel and aluminium imports, from anywhere in the world.

The US is the UK’s second-largest export destination for steel production, with an export value of circa £400m in 2023.

If this tariff hike does come into force in mid-March 2025, as expected, it is likely to have a direct impact on the UK economy.

Whilst it might reduce steel prices on the UK market initially, the reduced prices would in all likelihood lead to a reduction in income for the UK steel industry and in turn a loss of UK steel production and jobs, leaving the UK at risk of needing to import its steel in the future, with all of the economic uncertainties that brings along with it.

Other indirect impacts

Increased US tariffs will result in a hike in the cost of imported goods in the US marketplace in comparison to domestic alternatives, which in turn is likely to result in a reduction in demand for imported goods.

With manufacturers in Canada, Mexico, China and potentially the EU looking for new customers to replace reduced US demand, an influx in goods being offered to the UK market could result in a reduction in costs that UK businesses could benefit from, just as long as the imports do not create displacement to the detriment of UK manufacturers.

Will safeguarding measures such as quotas become necessary to protect UK businesses? Time will tell.

On the flip side, exporters may find new opportunities in international markets as some importers look to re-evaluate their supply chain. For example, UK exporters may be at a financial benefit if their international competitors face increased importing tariffs.

UK/US trade deal

In the meantime, it appears that trade negotiations between the UK and US governments are heading in a positive direction with the potential of a special deal being struck, that will benefit international traders in both countries. Let’s hope so. Watch this space.