Could Trump tariffs hit the UK? What it means for the North and impact on digital and tech sectors

It’s been an eventful few days in US politics, with newly inaugurated President Donald Trump wasting no time in imposing tariffs on Canadian, Mexican, and Chinese goods over the weekend. Overnight, he announced that the EU – and possibly the UK – could be next in line.

The fallout was immediate. By Monday morning, stock markets were struggling across the board. France and Germany saw declines of around two percent by mid-morning, while the FTSE 100 wasn’t faring much better, down 1.43% by lunchtime.

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Russ Mould, investment director at Salford Quays-based online broker AJ Bell, described the markets as “a sea of red.” He warned that tariffs—and the inevitable retaliatory measures—could lead to higher inflation, the reversal of recent tentative interest rate cuts, and rising prices. “There might be a trickle-down effect that knocks business and consumer confidence and feeds into weaker economic activity,” he added.

It wasn’t just traditional markets that took a hit. Trump, who campaigned on turning the US into the “crypto capital of the planet,” saw his ambitions backfire as the sector took a sharp dive. Despite backing from über-loyalist Elon Musk, one of the highest-profile crypto evangelists, investors began pulling their money out of “riskier” assets.

According to data from CoinMarketCap, roughly $600 billion has been wiped from major cryptocurrencies since Trump’s tariff announcement on Saturday. When he took office on January 21, Bitcoin was priced at just over $107,000. By lunchtime today, it had dropped to just under £95,000. Meanwhile, Musk’s Tesla shares were also down 3.6% in US pre-market trading.

Trump’s trade war is already sending shockwaves through global markets. The question now is how far the ripple effects will spread.

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Oh, Canada

Canadians, meanwhile, who Trump appeared to expect to apologise for their misdemeanours (which, albeit without much evidence, apparently include being responsible for the US’ fentanyl crisis and unfettered immigration – we’re looking at you Ryan Reynolds) had done the exact opposite. Outgoing PM Justin Trudeau promptly announced retaliatory measures, shops cleared the shelves of US-made products, hockey fans booed the US national anthem at the weekend’s games, and social media was awash with that rarest of sights, angry Canadians, vowing to fight to the death for their sovereignty and never buy their next-door neighbour’s goods again, and pointing out that Canada could simply switch off the energy it supplies to much of the Northern US.

UK tariffs?

We don’t yet know if, when, or how the UK may fall victim to Trump’s tariff-happy tantrums. So far, the president has stated that the UK has been “out of line” in its dealings with the US (in typically Trumpian fashion, without any real detail of how he’s reached this conclusion), but he thinks it can possibly be forgiven: “I think that one can be worked out, Prime Minister Starmer has been very nice,” the president said overnight.

Business Secretary Jonathan Reynolds was at pains to point out this morning that the US doesn’t have a goods trade deficit with the UK, in other words we currently buy more from the US than it buys from us. This in theory separates the UK from the 20 EU economies that the US does have a trade deficit with, including the bloc’s biggest economy, and holder of the biggest deficit, Germany. They will “definitely” have tariffs coming their way, Trump has confirmed.

Reynolds (Jonathan now, not Ryan) used this statistic to suggest that the UK should be excluded from any tariffs headed over the Atlantic: “I think we’ve got an argument to engage with,” Reynolds told the BBC, which would be all very well if Trump was known for his tendency to be influenced by logical argument.

Direct tariffs on the UK or not, however, there are rarely any winners in trade wars. Even if we manage to avoid direct tariffs, with most of our biggest trading partners clearly likely to be, or already being, hit by tariffs it would be optimistic in the extreme to think we’d be immune from the inevitable global downturn. If tariffs are in the picture too, it simply becomes a slightly bleaker one.

Global market dynamics

The digital, media and tech sectors are inherently reliant on global markets, not just in terms of customer reach but also for resources, technology, and talent. The government’s most recent data valued the UK digital sector at around £160bn in 2023, with a significant chunk of that coming from the North of England and Scotland. Tariffs would swiftly impact the cost structure of these businesses by increasing the price of hardware, software, and other materials that are imported from the US or other tariff-affected regions.

On a less tangible, but equally worrying for those engaged in content creation and broadcasting, level, British Film Institute chair Jay Hunt last week raised concerns at a parliamentary inquiry into high-end film and TV about “very protectionist language around Hollywood” coming from the new administration.

Digital businesses that rely on US technology, such as cloud services or marketing tools, could also face higher expenses. This may not only reduce profitability but also impair competitiveness against other international players who do not face added costs. The digital economy thrives on interconnectedness, and trade policies that skew this balance threaten to undermine growth.

Trade (bad) relations

Beyond immediate cost implications, tariffs can also strain international trade relationships. Media, digital and tech companies often engage in cross-border collaborations for content production, technology development, and research given the high costs frequently associated with this sector.

New tariffs could jeopardize such partnerships and limit access to international expertise, markets, and funds. Trade barriers might also discourage US-based companies from investing or entering into collaborative ventures in the UK regions.

These sectors also thrive on innovation and a constant influx of new talent. Tariffs can exacerbate protectionist tendencies, potentially affecting visa policies and other facets of international cooperation. Scotland and the North of England, like many regions all around the world, rely on a diverse workforce and a flow of international talent. Restrictions resulting from broader trade tensions could damage this flow of people (see also: Brexit), hindering regional growth in the process.

Localised disruption and responses

Regional industries might also face specific disruptions. For example, digital startups in tech hubs like Manchester or Dundee may find it challenging to scale if sudden increases in costs affect their cash flow. Smaller companies and startups, often simultaneously the most agile yet also most vulnerable to sudden economic changes, could struggle to absorb such shocks, leading to potential job losses or slowdowns in growth.

In response to tariffs, our businesses might need to reassess supply chains and seek alternatives to US technology, engaging more with European or Asian markets.

Much like his presumably unintentional crashing of his beloved crypto, the timing of Trump’s new trade war is certainly interesting, with new, cheaper Chinese AI technology taking the world by storm, and wiping trillions off the value of US tech stocks, just last week.

Regional strategies could also focus on boosting local production capacities to mitigate the effects of tariffs and lost US co-production partners. This could lead to a renaissance in local production, although the money would still need to come from somewhere, and it would be very much a renaissance driven by necessity rather than choice.

So in a nutshell, we could be looking forward to increased costs, reduced competitiveness, strained international trade relations, innovation setbacks, lack of access to global talent, restricted access to international markets and localised economic disruptions. But one thing you can’t say about the current incumbent of the White House is that he’s predictable – it could have all blown over by this time next week.

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