We take a look at what the 2024 USA elections mean for the UK and global economies.
Following a tight US presidential election race, Donald Trump has been elected president of the United States. The narrow lead held by Kamala Harris was overturned by a historic comeback that now sees Trump gaining a second term. His victory is accompanied by a likely Republican clean sweep of the White House, Senate and House of Representatives (the vote on the latter is yet to be fully counted). The resulting power to implement new policies and push through legislation is a stark contrast to the divided US government of the past two years, which has hindered significant policy changes.
According to some CBI members, the previously uncertain outcome of the presidential and congressional elections weighed on activity in the UK, as US firms held back from committing to projects. Attention now turns to the policy agenda of the upcoming Trump administration, and how this will affect the UK.
UK and European businesses recognise that tariff increases are clearly a major threat under a second Trump administration. The President-elect’s previous proposals would culminate in a 10% universal tariff on all US imports and a 60% tariff on goods coming from China. However, these proposed tariffs are extreme from a historical perspective, and analysts do not consider their full implementation to be likely – not least because of the potential economic consequences for US businesses and consumers. Instead, policy may be more selective, with varying tariff levels being imposed based on certain categories of goods – such as machinery and electronics – noting that Chinese electric vehicles, for example, are already subject to a 100% tariff.
In particular, European businesses will likely be vulnerable to Trump’s tariff policy, as trade with mainland Europe (and Mexico) looks to be a significant focus of the new administration, with automative trade a particular focus. UK businesses may be impacted too, both through any direct trade restrictions imposed by the US, and through any second-round effects on European demand from new trade restrictions.
However, there may be some offset from measures that prove more beneficial to certain sectors. For example, businesses within the financial and energy sectors may benefit from an easier regulatory climate in the US, as restrictions on oil & gas development and greenhouse gas emissions are relaxed. A Trump presidency is also seen as potentially supporting a lighter regulatory touch on AI and other emerging technologies.
The impact of a Trump victory and a clean sweep of Congress was modelled prior to the US election by Oxford Economics (OE). OE assumes that looser fiscal policy would boost US growth in the early years of the new administration (by a sizeable 1.5 percentage points in 2026).
However, if Trump pursues aggressive, across-the-board tariff increases, any such benefit is subsequently wiped out by a negative trade shock. Under this scenario, tariff increases phased in from 2026 push US GDP 0.8ppts below OE’s baseline forecast by 2029: reflecting the impact of higher trade costs, higher US inflation, a relatively tighter monetary policy stance by the Federal Reserve, and an appreciation in the US dollar. Global growth suffers to a similar degree, though the UK economy is relatively less exposed than its peers (with UK growth 0.3ppts lower in this scenario), reflecting a lower share of UK-US trade made up of goods.
This blog is a summary of more detailed analysis around the impact of the US election result, featured in our subscription-only quarterly Horizon Scanning report which looks at key developments in the UK economy and policy landscape. For more information, or to subscribe, please contact [email protected].
