Thursday November 14 2024, 4.40pm GMT, The Times
However, Capital Economics says UK economy would not be that exposed to Trump tariffs, given trade between the UK and the US in goods is broadly balanced. Tom Saunders, Business reporter
China Economics There would be a 1.2 percentage point hit to US growth in 2025-26, with inflation increasing by 0.6 of a percentage point, if Trump enacts the highest level of tariffs, Allianz Trade has forecast
There would be a 1.2 percentage point hit to US growth in 2025-26, with inflation increasing by 0.6 of a percentage point, if Trump enacts the highest level of tariffs, Allianz Trade has forecast
MARK RALSTON/AFP VIA GETTY IMAGES UK export gains could fall by up to $10.7 billion over the next two years in the event of a full-fledged trade war between the US and China, with the manufacturing sector most at risk, Allianz Trade has warned.
The trade credit division of the insurance and investment manager Allianz, formerly Euler Hermes, said that such a trade war, in which Trump raises US tariffs on China to 60 per cent for all critical and non-critical imported goods and to 10 per cent for the rest of the world, “looks unlikely” given the impact that this would have on the US as well.
It forecast a 1.2 percentage point hit to US growth in 2025-2026, coupled with a 0.6 percentage point increase in inflation if Trump were to enact the highest level of tariffs that he campaigned on. This would also cut global trade growth by 2.4 percentage points.
If the US were instead to enact more moderate tariff rises, raising measures already aimed at China to 25 per cent from 13 per cent and enacting modest tariff hikes of 5 per cent for the rest of the world — excluding Mexico and Canada — it would mean a drag on UK export gains of $2.8 billion and a 0.6 percentage point hit to global trade growth.
However, Capital Economics said that the UK economy would not be that exposed to Trump tariffs, given trade between the UK and the US in goods — which they believe Trump is focused on — is broadly balanced. Unlike China, Mexico and the EU, the UK does not run a significant trade surplus in goods with the US.
Focusing on the effect of a 10 per cent tariff on all UK goods, Capital Economics estimated that it would lead to an impact on UK GDP of between -0.1 per cent and +0.1 per cent. It justified this on the basis that UK services exports to the US, which are twice the size of its goods exports, would probably be exempt from tariffs and that the rise in the price of UK goods in the US would be offset by the pound weakening against the dollar.
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