Context
On 2 April 2025, President Trump announced that the United States was imposing a series of tariffs on all imports coming into the United States. Labelling it as “liberation day”, the President said that the aim of the tariffs was to:
“ensure fair trade, protect American workers, and reduce the trade deficit”
Both during the election campaign and since returning to office, President Trump has spoken about using tariffs as a tool of both economic and foreign policy. The economic aim of President Trump’s tariff policy is to address the United States trade deficit – i.e. reduce the gap between the value of goods the United States imports and the value of goods which it exports to other countries. In addition, President Trump has said he hopes the imposition of tariffs will encourage Americans to buy more US-made goods, and encourage businesses to locate more of their manufacturing in the US.
On foreign policy, President Trump has threatened to use tariffs to exert international influence. For example, in recent days he has suggested that if Russia does not agree to a ceasefire with Ukraine, he may impose tariffs on countries who buy Russian oil.
What are tariffs?
Tariffs are a duty which are set by countries (or a customs union) on goods being imported into its territory. The tariff is paid by the importer of the goods – so a company exporting goods to a market which increases tariffs will not face higher direct costs, but will see its products become more expensive and therefore less competitive in the importing country. Countries can use tariffs to generate revenue, but also to protect goods produced in their home market from foreign competition. However, it is worth noting that if tariffs have the effect of shifting purchasing to home-produced products, then imports (and hence tariff revenues) will reduce.
It’s worth noting that tariffs apply only to the imports of goods but not to imports of services.
What tariffs are being imposed?
President Trump revealed that the United States would impose a baseline tariff on all imports into the United States of 10%. This tariff will apply from 5 April 2025.
The United Kingdom is one of the countries for whom the 10% baseline tariff will apply, but many countries will face higher tariffs.
From 9 April 2025, the United States will “impose an individualized reciprocal higher tariff on the countries with which the United States has the largest trade deficits”. These include the European Union, whose exports to the US will face a 20% tariff whilst the applicable tariff on China will be added to previously levied tariffs resulting in a rate of 54%.
The President also has modification authority allowing him to:
“Increase the tariff if trading partners retaliate or decrease the tariffs if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the United States on economic and national security matters.”
Why does this matter for Scotland?
Whilst international trade policy is reserved meaning that the Scottish Government has no formal role in the development of UK trade policy, the Scottish Government has a number of trade strategies (these have been summarised in a recent SPICe briefing).
One of the Government’s key strategies is ‘A Trading Nation – a plan for growing Scotland’s exports’. The plan includes the identification of priority markets for Scotland – one of which is the United States of America.
The new tariffs have come in the week that Scotland’s politicians and representatives of Scottish business are descending on the United States to participate in the annual Tartan Week events.
Scotland’s exports to the USA
Exports Statistic Scotland 2021 is the latest publication on Scotland’s exports published by the Scottish Government. It allows us to look at exports of both goods and services. It shows that in 2021, £5.1 billion worth of exports went to the USA, which is 16% of all international exports from Scotland. Exports of goods and exports of services were of similar value, with each valued at just under £2.5 billion in 2021
When looking at the top 5 Scottish export sectors to the USA, two sectors are valued in excess of £1 billion: ‘financial and business services’ and ‘food and drink’ – mainly whisky. The rest of the top five consists of ‘engineering and advanced manufacturing’, ‘life sciences’ and ‘technology, digital and media’.
HMRC publish data on the import and export of goods. When looking at Scotland’s trade balance with the USA over the last 10 years, we can see that Scotland has generally had a trade surplus in goods, meaning it exports more goods to the US than it imports. There is a similar situation for the UK as a whole.
Whisky
The HMRC statistics show that in 2024 the value of Scotch whisky exports to the USA was £971 million. This is 18% of all Scotch whisky exports and around a quarter of all Scottish exports to the USA. Apart from the COVID period of 2020 and 2021, the value of whisky exports to the USA has remained relatively stable.
What impact might these tariffs have on the economy?
While there remain significant unknowns about how these tariffs will develop, not least how other important markets will respond to the measures taken by the United States, there is a consensus that the impact will not be positive for global growth in the short term.
The National Institute of Economic and Social Research suggest that global output could be 2 per cent lower, and UK growth could reduce to zero in 2026. Tariffs could also increase inflation in the UK over the next two years.
The Office for Budget Responsibility, in their March 2025 Fiscal Update, note that if there is a 20 percentage points increase in tariffs between the USA and the rest of the world, this could reduce UK GDP by 1 per cent.
In their February 2025 Monetary Policy Report, the Bank of England set out that US tariffs could reduce UK economic activity due to a reduction in demand for goods, the response from other countries could lower global demand, and disruption to supply chains could lead to price spikes.
How did previous tariffs impact Scotland?
During the first Trump Presidency, the US imposed a 25% tariff on single malt whisky from the UK. According to the Scotch Whisky Association, over the 18 months this tariff was in place the industry lost over £600 million in sales to the USA. The Scottish Government also modelled the potential impact in November 2021. This analysis found that the quantity of single malt exports declined by between 9.5% and 19.6% between Q4 2019 and Q4 2020, but that there was significant uncertainty about the financial impact – lying somewhere between £24 million and £506 million
The Scottish and UK Response
Following President Trump’s announcement, Scottish businesses expressed disappointment about the new tariffs. The Scotch Whisky Association issued a short statement:
“The industry is disappointed that Scotch Whisky could be impacted by these tariffs. We welcome the intensive efforts by the UK government to reach a deal with the US administration, and we continue to support this measured and pragmatic approach towards a mutually beneficial resolution.”
The CEO of the Scottish Chambers of Commerce, Dr Liz Cameron CBE issued a statement expressing concern about the tariffs:
“There is no doubt the introduction of hefty US tariffs on UK businesses will be very damaging for our economy.
Scotland’s international businesses are already facing huge pressures, and many will struggle to survive the imminent imposition of these Tariffs by the Trump administration.
This latest blow is further evidence that businesses urgently need even more support both at home and abroad if we are to deliver growth and protect and create much-needed jobs.
The tariffs are particularly disappointing given how much Scottish businesses have to offer the US, from our fabulous food and drink to our manufacturing, engineering and scientific expertise and a whisky trade which alone is worth one billion annually.
We will be ensuring that message is heard loud and clear during the current SCC trade delegations to New York and Tartan Week where we are working with both governments to promote international exports and inward investment.
Whilst we understand negotiations in business are often tough and protracted, we urge our UK and Holyrood politicians to continue engaging constructively in the interests of our 12,000 Scottish member firms, and their workforces, to deliver positive results.”
The Confederation of British Industry set out its views that there would be no winners from a trade war:
“Business has been clear: there are no winners in a trade war. Today’s announcements are deeply troubling for businesses and will have significant ramifications around the world.
“A cool and calm reaction from the UK Government is the right response: UK firms need a measured and proportionate approach which avoids further escalation. Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices.”
During his appearance at the Constitution, Europe, External Affairs and Culture Committee, Cabinet Secretary Angus Robertson MSP addressed the news of US tariffs telling the Committee:
“We are all aware that the United States Administration will impose additional tariffs on imports into the United States and this will clearly have an impact on many Scottish businesses for which the United States is an important export market. We do not believe the unilateral measures by the United States are the answer and we are concerned about the negative impact of trade barriers on the Scottish economy. We urge the United States and all parties to come together and to work towards mutually beneficial resolutions. We greatly value the strong social, cultural and economic ties that Scotland shares with the United States and we will work to ensure that these continue to flourish.”
Addressing business leaders in Downing Street, the Prime Minister Keir Starmer MP said:
“Clearly, there will be an economic impact from the decisions the US has taken both here and globally.
But I want to be crystal clear – we are prepared.
Indeed, one of the great strengths of this nation is our ability to keep a cool head.
I said that in my first speech as Prime Minister and that is how I govern.
That is how we have planned and that is exactly what is required today.
Nobody wins in a trade war. That is not in our national interest.
And we have a fair and balanced trade relationship with the US.
Negotiations on an economic prosperity deal, one that strengthens our existing trading relationship – they continue, and we will fight for the best deal for Britain.”
A trade war will not be helpful to achieving Scottish Government trade targets
Since the Scottish Government published its trade strategy in 2019, the international context has been challenging. The UK left the EU and now trades with several important markets on terms set out in the Trade and Cooperation Agreement. Global supply chains and trade have since been impacted by a number of events, from the blockage of the Suez Canal to the Covid-19 pandemic, and most recently the illegal Russian invasion of Ukraine. The prospect of a global trade war, as countries consider their response to the US tariffs imposed by President Trump, will certainly not help any strategy to “internationalise” the Scottish economy.
Andrew Aiton, Andrew Feeney-Seale and Iain McIver
SPICe Research