Back in January, I wrote about how 2024 would be the year of democracy – with around half of the world’s adult population able to head to a ballot box. The US Presidential race was always going to be the most consequential election, and unless you’ve been living under a rock for the last few days, you’ll know by now that it was Donald J. Trump who emerged victorious.
The Republican firebrand will take charge of the biggest economy on the face of the Earth and the cradle of much of the world’s innovation. Whether you love him or loathe him, how Trump governs will matter acutely for businesses both inside and outside of America’s borders.
Signature policies like his promise to apply a blanket 10% import tariff on goods – and more for products coming from countries like China and Mexico – would hit firms that sell to the US hard. Fears that this may trigger a retaliatory global trade war are already rippling through growth forecasts and share prices of trade exposed businesses. If things get really bad, be braced for inflation taking off again, and interest rates increasing to try to tame it.
As America is Britain’s single largest trading partner, we must be particularly prepared. More than 40,000 British businesses shipped wares to the States in 2023, worth over £60 billion in value and equivalent to a third of all goods exports that left our shores. Some of these firms might be able to shoulder a drop off in sales, but others will surely need to pivot or perish.
One potential note of optimism on this front, however, is whether Trump’s return to the White House will revive the possibility of a UK-US trade deal being signed. In the final year of his first presidency, initial progress was made towards one – but talks collapsed after Joe Biden came to power, in part due to disagreements with the then Conservative Government’s approach to the Northern Ireland Protocol. Just this summer, the Chancellor Rachel Reeves hinted that she would be open to resuming negotiations. She emphatically should – and in the coming weeks we will be publishing a range of ideas for how the ‘Special Relationship’ can be made that bit more special for businesses on both sides of the Atlantic.
It would be dangerous, however, to think that our future economic success should be tied solely to the benevolence of our American counterparts. There is so much else that only we can, and must, do to fix the foundations of our own economy – from bringing down the costs of building new infrastructure, to improving our immigration system to attract more of the world’s brightest minds to help start and scale companies here in the UK rather than elsewhere. Our report Building Blocks offers a starter for ten for how to do that.
In Pieter Garicano’s excellent piece on ‘luxury rules’ he argues that many European countries have historically allowed themselves to make certain choices in recent decades on the assumption that other economies will always be there to bail them out – whether it’s the US supplying innovation like breakthrough technologies and security in the form of military guarantees, or countries such as Russia and China supplying commodities like cheap energy and manufactured goods. In today’s increasingly fragile world, marked by rising tensions or even outright war, the costs of these choices are coming home to roost. This isn’t to say the answer is to become economically insular – far from it – but rather that we need to be more discerning about the policies we adopt, and less complacent about the roots of economic growth.
A sober assessment of what sovereign capabilities we need and the steps required to build them is necessary now more than ever, as is thought about where collaboration with others can best support our national goals. (On this last point, I found James O’Malley’s latest blog particularly persuasive.)
If this sounds gloomy, that’s not my intention. Rather, it asserts that it’s on ourselves – nobody else – to turn things around. In a sense, that should give us hope. It doesn’t matter who occupies the White House or whatever else may be going on in other corners of the world. There are still plenty of problems to solve at home – problems which, if solved, would swiftly make our own economy a more dynamic, secure and prosperous place. But it’s on us to start making those choices.
Out of the Shadows
On Saturday, Kemi Badenoch became the new Leader of the Conservative Party, and with that of His Majesty’s Most Loyal Opposition too. Over the course of this week, she has been appointing a fresh Shadow Cabinet. Of particular note for Britain’s entrepreneurs will be Mel Stride, who was named as Shadow Chancellor, while Andrew Griffith takes up the mantle of Shadow Business and Trade Secretary. As a former Chair of the APPG for Entrepreneurship, of which we’re the Secretariat, we were delighted to see Alan Mak appointed as the Shadow Science, Innovation and Technology Secretary. You can find the full list of portfolios here; we look forward to constructively engaging with them all in months and years ahead.