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US TARIFFS will have massive consequences, contributing to the deglobalisation of our trade system and seismic restructuring of global trading relationships.

Global trade liberalisation has led to cheap imported goods keeping global inflation lower than it would have been and this could cease to be the case.

The post-Second World War global economy – especially since the 1990s – has been marked by growing interconnectedness and trade liberalisation, leading to hundreds of millions of people in developing economies being lifted out of absolute poverty.

There is a valid fear that the deglobalisation of the world economy could halt this progress. When a trade war really kicks off, it is the poorest without the muscle to fight back who suffer the most.

Increased tariffs on imported goods to the US will hope to encourage US companies based overseas to inshore to the US.

For countries benefiting from the investment from US companies, does this leave them lacking investment? Could this lead countries to a race to the bottom on corporate tax rates in a last-ditch attempt to coax investment their way?

In the US, tariffs will effectively subsidise US firms. Those businesses that were previously struggling and would not have survived in the global free market will effectively be propped up as tariffs remove international competition.

The end result is inefficient and uncompetitive businesses dragging down the US economy.

How will this affect UK consumers?

Prices will most likely rise almost immediately, particularly for goods such as electronics, so inflation is certainly a worry. However, we are likely to see some trade diversion.

Goods that would have gone from China to US could instead be diverted to the UK to avoid heavy tariffs. Cheap goods could reduce inflation in UK but would impact businesses as they are forced to compete with foreign businesses flooding the market with cheap goods.

 If this was to happen it would take some time for the effects to kick in and it will not even necessarily happen.

Could there be a trade war and retaliation?

While unlikely to take the US on head to head, the UK government cannot sit back and do nothing as the economy is severely disrupted. There must be some form of reaction in the coming days.

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