Donald Trump’s presidency may be less than a month old but his actions are already having significant repercussions in the UK. In the wake of the US president’s decision to impose tariffs of 25 per cent on steel imports, here are some of the most notable challenges.
Steel
The looming threat of tariffs has alarmed British steel producers on two counts. The first is that it will have an immediate effect on trade, with about a tenth of the UK’s steel exports going to the US. UK Steel, the trade body, said it will have a “devastating” impact on the industry in this country.
Second, there is a concern that other large steel producers could begin dumping steel on the UK market in a bid to avoid the US tariffs.
The UK is hoping that it will be able to secure an exemption from the tariffs, but Trump has yet to set out details.
Blanket tariffs
During the US election campaign, one of Trump’s pledges led to more concern in Downing Street than any other.
He vowed to introduce blanket tariffs on all imports to the US of 10 per cent, a move that would have huge repercussions for the UK.
Sir Keir Starmer’s central promise is to grow the economy. Blanket tariffs could effectively kill those aspirations at the stroke of a pen.
Some experts have suggested that the UK’s annual exports could fall by as much as a third if Trump pushes ahead.
The signs so far have been promising — the US president has suggested that the UK is “out of line” on trade but that there is a potential deal to be done.
Financial services
Trump has made stripping back regulation on financial services a key plank of his second-term agenda.
In particular, US banks are hopeful that the president will push to lower the amount of capital and liquidity they have to hold — a key safeguard imposed in the aftermath of the 2008 financial crisis — but one which critics say has held back growth.
Trump has also said he wants to make America the “crypto capital of the planet” — and deregulate the sector.
Any further US deregulation of financial services would affect on the UK and potentially make it a less attractive destination for global capital.
It could also hit the City of London, which is competing in a global market to attract investment and talent. The London Stock Exchange is already struggling to persuade large companies to list in the UK and has lost major ground to New York in recent years. Further deregulation in the US could hasten this decline.
Brexit reset
Starmer has made improving the UK’s trading relationship with the European Union central to his plans for a post-Brexit reset.
But Trump’s presidency makes this trickier for the government as it seeks to balance its transatlantic relationship with its cross-Channel one.
In particular, there is a fear that Trump could use levers, like tariffs, to drive a wedge between London and the EU and force the government to choose sides.
Starmer has always insisted that close relationships with America and Europe are not incompatible. Trump could challenge that assumption.
Online harms
Under new online harm laws, social media giants face fines of up to £18 million or 10 per cent of their annual revenue if they fail to remove harmful content from their platforms.
But these harsh penalties have attracted the ire of US tech firms, who are increasingly influential in the Trump White House.
The fear is that the new administration could side with companies such as Elon Musk’s X and demand that the UK waters down the proposals — either as the price of a limited trade deal with the US or, in the worst case, with the direct threat of retaliatory action.
Lord Young of Acton, the founder of the Free Speech Union, claimed the government was on a collision course.
He said: “If Ofcom tries to fine X or Facebook 10 per cent of their global turnover for not removing content that isn’t lawful, I predict a showdown between Elon Musk, Mark Zuckerberg and the UK government. If that happens, Trump will side with his tech bros and tell Sir Keir that if he wants a trade deal, he’ll call off his dogs.”
Defence spending
The UK is spending around 2.3 per cent of GDP on defence and Starmer has pledged to increase this to 2.5 per cent. However, this new target is not expected to be reached until after 2030.
Trump has demanded that European allies spend considerably more, suggesting that they increase spending to 5 per cent.
While this is seen as a gambit, senior government figures accept that Trump’s demand puts the UK in a difficult position at a time when public finances are strained.
The new Nato secretary-general, Mark Rutte, suggested that countries such as the UK should be committing to increasing spending to a target of 3.7 per cent of GDP.
Climate
Trump has already urged the government to “get rid of windmills” in the North Sea and open it up for oil and gas.
And while this is just rhetoric, his opposition to global climate change policies nevertheless poses challenges to the UK’s own transition plans.
Central to the government’s case for investing in renewables is that it will reduce energy costs to consumers.
But if Trump succeeds in his objective of increasing supply and reducing the price of oil and gas then this, in turn, makes this argument less compelling.
The government will also have to factor in Washington’s reaction to UK (and EU) plans to impose a new “carbon border tax” on imported goods which have been made in countries without the same environmental restrictions.
This could very possibly result in the US taking retaliatory action against UK exports.
