How will the US-China trade war affect the UK?

us china

As the rhetoric between the United States of America and China becomes ever more hostile, the ongoing trade war between the two global superpowers is intensifying.

US President Donald Trump recently added a 10 per cent tariff worth $200 billion on all Chinese-manufactured goods imported into the States. China has retaliated in its own way by placing tariffs of between 5 per cent and 10 per cent on $60 billion worth of goods made in the US and imported to China.

It all seems somewhat tit-for-tat. President Trump’s actions have been labelled “protectionist” in some quarters, while Trump’s supporters insist that the President is simply a champion for “fair trade”. However, China’s decision to hit the US with tariffs of its own will likely affect American manufacturers such as global giant Apple, who could be forced to ramp up retail prices for the latest iPhones if import costs for its parts made in China rise.

Closer to home, there are fears for a global trade war, especially with China matching the US dollar-for-dollar in terms of new tariffs. Even the European Union (EU) has been forced to retaliate against the US after being hit with new steel import duties, opting to hike up costs on US-manufactured Harley Davidson motorbikes and orange juice made in Florida.

Global trade wars have a history of influencing the financial markets too. The Bank of England recently estimated that the prospect of a global trade war would decelerate GDP growth on a worldwide scale by as much as 2.5 per cent during the next three years.



2.5 per cent may not seem a huge amount but when you could that would equate to a $90 trillion loss of income, you might start to think differently. In fact, the Bank of England forecasts that such a decline in GDP growth would cut GDP growth in the UK by 2 per cent and the American equivalent by as much as 5 per cent, which would hit the Dow Jones index hard.

In the Far East, financial experts believe that the ever-growing rift between the US and China could play into the hands of Beijing. Increased trade tariffs from the US could actually assist China by minimising its economy’s dependence on the US in future years. China would be forced to trade more frequently with its neighbours in south-east Asia, which could help divert trade flows into developing countries such as Vietnam, Indonesia and Malaysia.

Of course, the United Kingdom’s impending departure from the European Union (EU) is another hot topic globally. Brexit could play nicely into the hands of the UK government who could portray the country as the next best trading alternative for both China and the US.

If the British government can negotiate new and productive trade deals with both China and the US, this could provide a significant shot in the arm for the UK economy. The trading potential for the UK with the likes of America and China is tremendous and it is sure to be something in the back of the minds of the UK’s negotiators during the ongoing Brexit talks.