Tariffs and Triumph: The UK’s Edge in a Fractured World
Show abstract
We analyse the impact of Donald Trump’s 2025 tariff policies on global trade using a structural gravity model that simulates six scenarios, from targeted US tariffs to full global retaliation. A full-scale trade conflict would cost the world economy $1.4 trillion in welfare. The UK faces supply-chain vulnerabilities but may gain from trade rerouting: UK exports to the US rise by 17.5% in one scenario, yet fall by 43.6% under full retaliation. No economy emerges unscathed from systemic tariff escalation.
A structural gravity assessment of Donald Trump’s 2025 tariff agenda and what it means for the UK. We simulate six scenarios, ranging from targeted US tariffs to full global retaliation.
Key findings
- Full-scale trade conflict produces a $1.4 trillion global welfare loss.
- Trade diversion can briefly favour the UK: in one scenario UK exports to the US rise by 17.5%.
- Under full retaliation, UK exports to the US fall by 43.6%.
- Imports shrink across the board, threatening input supplies for sectors such as aerospace and technology.
- As in the 2018 US–China trade war, escalation brings higher prices, weaker competitiveness and fragmented supply chains — no economy emerges unscathed.
Policy recommendations
Adapt global value chains by diversifying suppliers; diversify trade through CPTPP and a deal with India; keep trade policy agile while strengthening multilateral cooperation; and stabilise the relationship with the EU through sector-specific deals, lower non-tariff barriers, digitised customs, regulatory alignment and investment in trade infrastructure.
For how these numbers played out once the tariffs landed, see the Trump Trade War Diary — Day 189 and the peer-reviewed follow-up, The Return of Protectionism.
Report: Centre for Business Prosperity, Aston University, March 2025. With Jun Du.