Following the election on Tuesday, November 5th, Donald Trump has officially been elected as the 47th President of the United States of America.
Trump has many financial plans for his second term as President, but how could these policies affect us in the UK?
Donald Trump, the 47th President of the US, wants to use international affairs to advance US interests.
He wants to do this in many ways, but one way that affects countries on a large scale is through tariffs.
A tariff is a tax imposed by the government of a country on imports or exports of goods.
Tariffs have three main positive functions, for the US.
Tariffs can damage another country, so can be used as a threat to seek change from another country.
Tariffs can be used as a way of making home production more competitive, and overseas companies might decide to assemble or make more in the US to avoid tariffs.
Tariffs bring in more money to the US, and so Trump will be able to reduce, or at least not change, the amount of taxes on US workers.
However, tariffs also have three main harmful functions for the US.
Firstly, they raise the price of most products, so are seen as inflationary.
Tariffs are technically a tax on US consumers and foreign producers, limiting income that Trump wants.
Tariffs may cause retaliation from other trading nations, with the possibility of causing a tariff war, which is an economic battle between countries where each levies an additional tax on the other's exports.
This can boost prices and cut output worldwide, so that everyone, on average is worse off than without the tariffs in the first place.
The UK is in charge of its own trade policy and free to negotiate its own bilateral deal with the United States of America.
The US, which is the UK's largest trading partner, has not had many issues surrounding trade with the UK in recent years.
There is no guarantee that the UK will not have tariffs imposed on them, if the general policy of tariffs imposed on all goes ahead, without UK diplomacy doing a special deal.
If tariffs are imposed upon the UK, then UK exports will take a large hit.
Trump has not yet threatened the UK with tariffs, but there are fears that the UK will be next after Trump stated, according to the BBC, that he wants to impose tariffs on China, Mexico and Canada on day one of his presidency.
Sir Kier Starmer's Government is reportedly ready to retaliate if Trump does threaten the UK.
According to the Independent, in what will be largely seen as a message to Trump of the implications of any tariffs imposed on the UK.
Reportedly, Downing Street said: “A million Americans work for UK-owned businesses and vice versa, and the fact that UK-US trade was worth £304bn in the last year, clearly that is something that we want to build on.”
Whilst so far, there are no direct threats of tariffs from the US to the UK, it is clear that if tariffs are imposed upon the UK there will be a strain on the trade relationship between the UK and the US, and consequently, cause numerous problems or both sides.
Sources: https://www.bbc.co.uk/news/articles/cvg7y52n411o.amp
https://www.independent.co.uk/news/uk/politics/donald-trump-trade-warbrexit-b2653871.html
https://www.investopedia.com/terms/t/tariff-war.asp
https://www.charles-stanley.co.uk/insights/commentary/trump-tariffs-explained
https://en.wikipedia.org/wiki/Tarif
