The incoming Trump administration represents a “challenge” for the new Labour administration, while a changing regulatory environment is impacting business confidence.
At the Import Export Show, hosted by the Chartered Institute of Export & International Trade, experts talked about the ‘year of democracy’ and how businesses could navigate the new political landscape.
During the panel session – entitled ‘A new global order: How a year of elections is reshaping international trade’ – the topic of tariffs was brought up early and often.
David Henig, director of the UK Trade Policy Project at the European Centre for International Political Economy (ECIPE), predicted a “chaotic” period with Trump in office, although the UK may not be the primary target of his tariffs.
Tariffs
Before even entering office, president Donald Trump threatened to levy tariffs on Mexico, China and Canada, prompting a measured response from his North American allies.
While many UK businesses remain focused on Europe for trade, many are looking towards the US for opportunities, and a potential tariff war could cause issues, particularly for smaller businesses.
“The US is still one of the most important markets” for many when thinking about growth, said Kate Foster, senior international affairs advisor at the Federation of Small Businesses (FSB).
“I don’t think this is going to go away.”
‘Challenge’ for government
When it came to tariffs, Henig said that Trump would be a challenge to be dealt with for the UK government.
“Trump is just the kind of person that grabs attention, we’re going to have to navigate that as best we can.
“It’s going to be a pretty erratic few years for the US market.”
However, the unstable political environment is going to make it difficult for governments to forge coherent trade policies, he said, with businesses having to navigate this world of rising nationalism and protectionism.
“It’s going to be difficult for things like free trade agreements. The onus will be on businesses that want to trade.”
Economics
Foster said that the changes meant that “a lot of small businesses, even if they want to grow, are dealing with the issues that are right in front of them.”
In addition, the economic environment was proving difficult for many SMEs.
The changes to the regulatory environment brought about by the year’s elections, as well as ongoing supply chain issues, were meaning that businesses of all sizes were struggling.
“My instinct would be that the domestic economy would be the deciding factor in SMEs choosing to trade,” Foster said, citing changes to employment and taxation under the current government.
“A lot of small businesses, even if they want to grow, are dealing with the issues that are right in front of them.
“If you’re a small business and times are hard, then trade might not be on your radar in a way that was before.”
Brexit and other problems
“Most small businesses can’t find ways round” issues brought about by Brexit, Foster said, because they “don’t have the same power in the supply chain.”
“Business confidence is very low,” said Emma Rowland, policy advisor at Institute of Directors (IoD), citing data collected by her organisation.
The IoD’s research found that there was an uptick in confidence when Labour entered government back in July, but this has disappeared as a result of proposed tax raises and improved workers’ rights.
“Businesses are concerned that, instead of creating a positive environment, with such constraints on employment and taxes, the government has created an environment where businesses can’t grow.”
While the government is promising a trade strategy that aligns with the industrial strategy and foreign policy, this is taking longer than expected.
The race to a trillion
A constant theme of the last government was the push to hit a trillion in exports by 2030. However, this ‘race to a trillion’ was not necessarily the best policy, said Foster.
Instead, government could help businesses change their mindset and focus on the number of businesses exporting.
“It’s a mindset issue. Many businesses don’t think they can export.
“[Many SMEs] don’t want to grow beyond their borders, because they don’t think they can.”
When it comes to the year of elections, “Businesses need to be more aware of geopolitical changes,” said Henig.
“Overall, export and trading is complex. That’s not going to go away.”
