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Economy

The impact of the US-China trade war on the UK-US special relationship

Thursday 03 - 15:30 By: Zahouani Ilham

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Since Winston Churchill first coined the term “special relationship” in 1946, it has been the cornerstone of the bond between the UK and the US. This relationship, which was initially forged in the face of Soviet opposition, has grown stronger over the decades. However, after nearly 80 years, this relationship is facing one of its toughest challenges, as the UK finds itself caught in the crossfire of a new trade war launched by the United States.

The looming question for the British, especially over the past few weeks, has been whether the UK will be treated equally to other nations affected by the US’s new tariffs, set to take effect on April 2.

Since the election of Donald Trump, British Prime Minister Keir Starmer has worked tirelessly to strengthen ties with the new Republican administration, believing that the “special relationship” will become even stronger. Starmer has emphasized the growth of this bond, focusing on new areas such as economic growth, security, innovation, and technology.

After his meeting with Trump in February, Starmer’s efforts intensified, particularly in negotiations to secure a new trade agreement with the US. This deal is seen as a potential workaround for the 25% tariffs on imports that President Trump plans to impose starting in April, referred to in Washington as “Liberation Day.”

However, negotiations have proven complex, and British officials acknowledge that the UK will not be exempt from these tariffs. The government has been preparing for all scenarios in anticipation of Trump's announcements. British officials recognize that including the UK on the list of affected countries could further complicate efforts to revive the nation’s ailing economy.

According to the British Office for Budget Responsibility, the nation’s GDP could shrink by 0.6% by 2026 due to these tariffs. If the UK retaliates with its own tariffs, the economic decline could reach 1%. Yet, the government is not currently considering retaliation. Despite the severe potential impact on the British economy, the government maintains a conciliatory stance, even willing to offer concessions to the US to protect its annual £60 billion export market.

Sources close to Downing Street indicate that the UK is handling the situation “calmly and cautiously.” British media reports suggest that the government has made concessions to the US, particularly in the agricultural and tech sectors. According to The Guardian, the UK has proposed significant tax cuts for large American tech firms in exchange for lowering the tariffs set by the Trump administration.

As UK Trade Minister Jonathan Reynolds put it, the UK is now at a “critical juncture.” These developments have also provided ample material for the opposition, led by the Conservative Party. The Tories accuse the Labour Party of failing to protect the UK's economic interests.

Conservative leader Kemi Badenoch criticized Labour, stating, “This is further evidence that whenever Labour negotiates, Britain loses.” Meanwhile, analysts predict that the US tariffs could significantly worsen the UK’s economic outlook, threatening to undermine the government's recently implemented austerity measures aimed at reviving the struggling economy.