In Depth

How Donald Trump’s trade war will affect the UK economy

The EU, Canada and Mexico vow retaliation as tariffs come into force today

The US has imposed steep tariffs on steel and aluminium imported from three of America’s largest trading partners, including the EU, after a deadline for trade negotiations passed without a deal.

Donald Trump announced worldwide plans for the tariffs - 25% on steel and 10% on aluminium - in March, but gave Canada, Mexico and the EU limited exemptions to pursue trade negotiations. The deadline for those talks ran out at 5am today BST.

What was the immediate reaction?

News of the tariffs rattled global markets and sparked sell-offs of manufacturing shares by US investors.

European and Canadian leaders also reacted “swiftly and angrily” to Trump’s decision. Jean-Claude Juncker, the president of the European Commission, promised “immediate retaliation”, The Guardian says. Mexico has also vowed to impose retaliatory import duties on US products.

Closer to home, Trump is also facing criticism from Republicans, including their leader in the House of Representatives, Paul Ryan. “Today's action targets America’s allies when we should be working with them to address the unfair trading practices of countries like China.” he said.

Why is the US imposing tariffs?

Throughout his presidential campaign, Trump accused China of dumping steel on the US market - and said previous presidents had made a series of “bad deals” to promote free trade.

The BBC says he has “justified the tariffs by arguing that US steel and aluminium producers are vital to national security and threatened by a global supply glut”.

Canadian prime minister Justin Trudeau hit back at the justification, saying: “That Canada could be considered a national security threat to the United States is inconceivable.”

How will tariffs affect the UK economy?

The good news is that the UK’s import-heavy economy is more resilient to the impact of tariffs than countries such as China and Germany, who export more goods than they import, says The Daily Telegraph’s Matthew Lynn. In fact, he adds, “we’ll hardly notice because we sell so little abroad these days”.

But Gareth Stace, the director of industry group UK Steel, said the tariffs “would have a profound and detrimental impact” on the UK steel sector.

“The sector is in the midst of a fragile recovery following years of considerable turmoil, it would be utterly devastating if this were to be undermined,” Stace told Sky News.

And the worldwide impact on stock markets will be unavoidable. After ten years nursing the world’s markets back to health from the financial crash of 2008, “a trade war is the last thing the global economy needs right now,” Lynn says.

What does it mean for Brexit?

Supporters of Brexit have long held out hope that a free trade deal between the US and UK could make up for any economic pain caused by leaving the EU.

But the impending arrival of “Brexit Day” makes the UK more vulnerable in a global trading atmosphere poisoned by insularity and mistrust, says Sean O’Grady in The Independent. “In an increasingly protectionist world, inheriting the EU’s old trade deals and winning new ones will be tougher than ever.”

Will the trade war escalate?

Trump has shown willingness to change his mind, and some analysts hope that he can be persuaded to back down.

Speaking to the BBC when the tariffs were first proposed, Roberto Azevedo, the director general of the World Trade Organization, said Washington was still talking to Beijing.

“These conversations are ongoing precisely because people are beginning to understand, I hope, how serious this is and the kind of impact this could have to the global economy,” he said.

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