In the News Teaching Activity – how could the US election outcome affect living standards in the UK? (Nov 2024)

According to the NIESR, the Trump victory in the USA may spell bad news for the UK economy.

The National Institute of Economic and Social Research has cautioned that Trump’s proposed tariffs—a 60% tax on Chinese goods and a 10% tax on other imports—would trigger a global trade war, reducing UK growth by 0.7 and 0.5 percentage points in the first two years. As a small, open economy, the UK would face the fallout of reduced trade, seeing inflation 3-4 points higher and interest rates rise by 2-3 points. This stark forecast contrasts with expectations of modest growth, low inflation, and falling rates in the absence of tariffs. Retaliatory tariffs would worsen outcomes, not only for the UK but also for the USA. UK living standards may be negatively affected.

Trump tariffs would halve UK growth and push up prices, says thinktank | Donald Trump | The Guardian

1. What is a tariff, and how might US tariffs affect the price of goods in the UK?

2. How does a reduction in global trade affect the UK economy, especially given its position as a small, open economy?

3. Discuss the potential consequences of slower economic growth for living standards in the UK.