When the UK Chancellor, Rachel Reeves, returned from an early January trip to Beijing, she was keen to underscore the benefits to her country in both economic and diplomatic terms. The UK will, she said, see trade in-flows worth £600m in the next five years. At the same time, the UK will continue to challenge China on its ‘support for Russia’s defence industrial base,’ which enables the Kremlin’s war against Ukraine, as well as on domestic interference and sanctions against British parliamentarians. 

‘The agreements we’ve reached show that pragmatic cooperation between the world’s largest economies can help us boost economic growth for the benefit of working people,’ said Reeves. ‘More widely, today is a platform for respectful and consistent future relations with China. One where we can be frank and open on areas where we disagree, protecting our values and security interests, and finding opportunities for safe trade and investment.’

Reeves made the trip on the eve of Donald Trump’s inauguration as US president – significant, as his stance on international trade remains as tough as ever following his four-year absence from the White House. It’s been reported that the US could hit UK goods with import taxes of between ten and 20 per cent.

Though Trump has yet to confirm how he intends to proceed, Claudia Hartleben, Chair of the Agency and Distribution Subcommittee of the IBA International Commerce and Distribution Committee, says it’s ‘very much expected that tariffs will be imposed on global goods’. Given this and the impact Brexit has had on EU-UK trading relations, she says it makes sense that Reeves and Prime Minister Keir Starmer want to strengthen other partnerships. 

Indeed, Hartleben, who’s an international trade counsel at Greenberg Traurig in Washington, DC, says it won’t be surprising to see the UK continuing to hold talks with other countries as it looks to insulate itself from any Trump-induced shocks. ‘In the first one to two years it may be too early for the UK to start aligning itself more with Asia over Europe or vice-versa, but from a trade standpoint the UK is beautifully positioned for both those jurisdictions, as well as Africa,’ she says. ‘Its strength may lie in continuing to offer itself as a gateway for those other blocks and let [them fight] it out with the US.’

Indeed, the country’s National Institute of Economic and Social Research warned in the autumn that Trump’s protectionist policies could result in stunted growth in the UK, rising inflation and higher interest rates. The impact will be focused on particular sectors, such as pharmaceuticals or car manufacturing, but Raj Bhala, Special Projects Officer on the IBA International Trade and Customs Law Committee, says the UK should prepare for Trump to ‘use tariffs as a bludgeon to get what he wants’. 

On issues such as the Chagos Islands or NATO, Bhala – who’s Brenneisen Distinguished Professor in the School of Law at the University of Kansas – believes Trump ‘will say “if you don’t give us what we want then here come the tariffs on Scotch whisky”. That’s an issue that we in the trade world generally haven’t seen. This [would be] the use of American tariffs to alter the foreign policy of the UK, not only its trade policy.’   

In late January Colombia prevented two US military deportation flights from landing in the country, arguing that Colombian migrants should be returned on civilian planes. Following the Trump administration’s threat of tariffs, Colombia agreed to accept returns regardless of means.

The UK may struggle to escape the worst through the negotiation of a free-trade agreement (FTA). Reeves has said she’ll be making ‘strong representations’ to the Trump administration on the benefits of free trade, but Bhala says the US-UK FTA first mooted following Brexit probably won’t materialise.

‘That cannot happen legally unless President Trump gets trade negotiating authority from Congress,’ he says. ‘That authority expired in 2021 and President Biden never renewed it. He didn’t have the votes to get it through Congress and the reason is that we haven’t had a president since [Bill] Clinton who has laid out a vision for free trade. [Barack] Obama and Biden were not that interested in trade. By the time the first Trump administration came around, he shifted the paradigm to trade being a risk.’

Yet, despite Trump’s hostility, Hartleben says that – relative to other trading partners of the US – the UK is ‘sitting pretty’. The Trump administration ‘is going to prioritise building leverage where it considers there to be significant economic or national security concerns – with Mexico, Canada and China principally, but also the EU,’ Hartleben says. ‘Those countries and trading partners, because of their geographic proximity, because of the existing USMCA, will necessarily receive higher attention from Trump. The UK is not in those groups of immediate interest so is not an object of ire.’

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