Facing Liberation Day: The Global Tariff Crisis in the UK

By Coby Saxby

As we have all come to expect from US President Donald Trump’s second term, the world order has seen yet another radical shakeup – this time in economics. In what Trump hailed as “Liberation Day”, the President held a press conference on April 2 to announce a ramping up of trade tariffs against nations deemed to have an ‘unfair’ trade relationship with the United States, with the US enacting a two-tiered tariff policy (a baseline 10% tariff for all plus extra tariffs assessed on an individual base). While many of the world’s major economies saw heightened tariffs, the United Kingdom was not hit with any extra tariffs, remaining mostly at the 10% level. While Liberation Day could have been far more damaging to the British economy, especially when compared to its global counterparts, many leading voices in both British industry and governance have met the tariffs with concern and alarm. So why has Trump launched such a scathing attack on the global economic order? Why are British leaders becoming increasingly annoyed at Britain’s treatment (despite receiving some of the lowest tariff rates), and how might Starmer’s government handle economic policy going forward?

In the two weeks since “Liberation Day”, the global economy has become significantly more volatile. A combination of a global market crash – with all major global stock indexes seeing sharp declines at levels not seen since the 2020 global lockdowns or the 2008 Crisis – and the revelation that tariff calculations were not in fact ‘reciprocal’ tariffs but were instead designed to counter trade deficits (when an economy imports more in value than it exports) led economists, businesses and investors to panic and express anger at the actions of Trump and his cabinet. Even Elon Musk, inseparable from Trump on the campaign trail and in the first weeks of the Presidency, has taken to X to clash with Trump’s trade advisor Peter Navarro and to call for a reduction and eventual rollback of tariffs against Europe. Most importantly for a populist like Trump, national opinion polls have plummeted amidst concern from Goldman Sachs and J.P. Morgan (amongst other financial analysts) that an American recession was increasingly likely as a result of trade disruption. The backlash ultimately worked – as all additional tariffs not directed at the People’s Republic of China (PRC) have been paused, leaving only the baseline 10% tariff (plus limited 25% tariffs on automobiles, steel and aluminium) in effect. While a relief for the global economy, it is this decision that has caused a backlash in the UK.

The UK was never going to take a critical hit to its economy as a result of Liberation Day, since the tariffs are designed to target imported goods, as opposed to imported services. The UK transitioned from a goods-based export market to primarily exporting services (i.e. finance and banking, legal assistance, and insurance) as part of its deindustrialisation post-WWII. As per the IMF, 78.3% of the UK’s nominal GDP is based on services, compared to only 21% in the industrial sector. Therefore, the Trump administration did not perceive the UK as much of a threat to American industry compared to other, harder-hit countries. However, this does not mean that the UK has gotten off ‘scot-free’. For starters, the 10% tariff does not apply to one of the largest British industrial sectors: the motor industry, hit by the 25% baseline on automobile imports into the US. Jaguar Land Rover, one of the largest UK automobile manufacturers and a close partner of both the West Midlands as a county and the University of Warwick as a university, has halted all new exports into the US as a result of tariffs for two weeks – a market worth £6.5bn to the manufacturer. With the loss of revenue, the company’s 38,000-strong workforce (many living in and around Birmingham and Coventry) is now vulnerable to potential cuts. The Institute of Public Policy Research has warned that up to 25,000 jobs could be at risk as a result of disruptions to JLR’s exports. This is just one story of how tariffs pose a significant detriment to the UK’s economy. So – what next?

As a nation that Trump appears to have a certain personal affinity for and a nation that prides itself on the ‘special relationship’ with its Atlantic counterparts, the UK government appears to be pursuing a diplomatic solution to this crisis before trialling any drastic measures. Building on progress made post-Brexit during Trump’s first term, London and Washington are actively pursuing a free trade agreement, which will drop trade barriers (i.e. tariffs) between imports and exports between the two countries. JD Vance, despite previous comments criticising the UK on immigration (including calling the UK an ‘Islamist country’) and supposed anti-free speech laws, said that there was a ‘good chance’ of a deal between the two countries and while it is unlikely that a full free trade agreement is incoming it is not unrealistic to expect some sort of tariff reduction deal in the near future. If the UK were pursuing economic stability above all, then this would be a suitable conclusion to this crisis, but unfortunately, Liberation Day is only one step in a series of shifts in American foreign, security and economic policy in favour of disengagement with traditional allies. If Trump can turn his back on his traditional allies so quickly and so harshly, then is it in the UK’s interests to deepen our economic ties? Can we trust the alternative? Sir Keir Starmer has his work cut out for him navigating his crisis - there is no obvious solution or coalition to turn to in this time of crisis, nor is it possible to stay the course as it was before April 2.