Major headlines in the past weeks have been about the Trump administration’s new tariffs and countries fighting back. It’s becoming a global catastrophe, given that the administration is targeting several countries, including China, Canada, and others in the euro area. The Welsh economy isn’t excluded, as the UK has been hit with a 10% tariff on nearly all goods it exports to the US. These tariff laws could mean the end for some Welsh companies and businesses and also affect other aspects of the British economy. What should we expect from this turn of events? Here’s a detailed analysis for you.
UK vs US Trade Ties
The UK and US have a long history of trade relationships, and recent data reveals that the value of Welsh goods traded with the US was £6.4 billion in 2024, solidifying the fact that the US is Wales’ second-largest goods export partner. These exports cut across goods in several industries, such as cars, medicinal and pharmaceuticals, aircraft, and others. Cars and medicinal products were the most exported products from the UK to the US in 2024, standing at £9 billion and £6.6 billion, respectively. The United States has now issued new tariff rates of 10% on UK exports. In addition to this, a 25% tariff has also been put on UK car exports as well as steel and aluminium products. While the White House documents released revealed that some products were exempted from these charges, it doesn’t change the fact that companies are now faced with an additional 10% expenditure to sell their products in the United States. Some products already cost two to three times more in the US than in the UK; an additional 10% charge for consumers might be the last straw and completely kill off sales.
Impact on the Welsh Economy
Export and Investment Risks
A recent report published by Yahoo Finance revealed the Welsh Government’s Cabinet secretary’s concerns about the impact of the US tariff. In this release, she mentioned that this change could have a “far-reaching” impact on Welsh businesses. The US accounts for 13.5% of total goods exports in the country, and export-dependent businesses are obviously at greater risk following this development. In 2024, 3,188 Welsh businesses exported goods globally, 33.4% of them in the United States. Industries like steel and aluminium, aerospace, and automotive might take extreme hits from these changes.
The cost price for Welsh producers will rise, and demand may drop as buyers look elsewhere. Issues like these have a direct impact on the economy because jobs and wages in export-reliant communities will be under pressure. Unless British firms find new trade partners outside the US, we might begin to see extreme job cuts. Another likely effect is the possible reduction in foreign investments. Uncertain trade conditions over a prolonged period often lead to fluctuations in investment markets. Stock prices might crash, and investors might be inclined to look to calmer markets.
Interest Rates May Fall Further
Interest rates in the UK are currently at 4.5%, and until recently, there have been predictions that the Bank of England (BoE) would initiate some cuts in 2025. Typically, lower rates would boost the economy because it reduces inflation. In the UK, this rate also dictates household expenditures, like borrowing money for mortgages, credit cards, and loans. If interest rates remain higher, then all of these things would cost more, and inflation might persist. The forecasts for a possible change in interest rates might start to get shaky if Trump’s tariff fuels imbalance and inflation. However, there is also the possibility of the BoE resorting to steeper cuts in order to boost sentiment about the economy.
Impact on Currency Value
GBP/USD volatility is bound to ensue with brewing trade wars. GBP/USD already crashed over 100 pips below 1.28, and there might be further declines in the coming days. Some traders are benefiting from these gains through spread betting while also eyeing Feds minutes and US CPI (Consumer Price Index) data. There is a lot of uncertainty; investors’ sentiment is already deeply affected, and the volatility is playing out on both ends. Reuters recorded some plunge in British stocks on Monday, 7 April. British blue chips fell by more than 10%, and the equities market is battling an immense sell-off. At the same time, US stocks are also falling at an alarming rate as countries begin to announce their counterattacks on tariff imposition. However, if the tariff plans remain the same, UK stocks are bound to pack more of the punch.
Navigating Uncertainty in a Shifting Global Economy
The first few months of Trump’s administration have clearly shown that there are several incoming changes in economies. Countries are adapting to this, fighting back, and protecting their own. Wales should do the same. The British economy needs to find ways to adjust to new global trade laws and protect its economy through strategic planning for stability. Investors, companies, and individuals should also plan to adjust to the everyday shift in global economies.