UK export growth could shrink by up to £8.5 billion over two years if a full-scale US-China trade war erupts, Allianz Trade has warned.

A protracted trade conflict between the world’s two largest economies could severely impact the UK’s manufacturing sector, according to Allianz Trade, the trade credit division of the global insurance and investment manager Allianz, formerly known as Euler Hermes.

The organisation cautioned that an escalation of US tariffs on China to 60 per cent for all goods—both critical and non-critical—and 10 per cent for imports from the rest of the world could result in significant economic fallout. However, Allianz Trade described such a scenario as “unlikely,” highlighting the detrimental effects on the US economy itself, including a projected 1.2 percentage point hit to GDP growth and a 0.6 percentage point rise in inflation by 2026.

Global trade would also feel the pinch, with growth potentially slowing by 2.4 percentage points under the maximum-tariff scenario.

A more moderate tariff increase—raising existing US tariffs on Chinese imports from 13 per cent to 25 per cent and introducing smaller hikes of 5 per cent for imports from other countries (excluding Mexico and Canada)—could still hinder UK export growth by approximately £2.2 billion over two years. It would also reduce global trade growth by 0.6 percentage points, Allianz Trade noted.

Capital Economics offered a more optimistic view, arguing that the UK’s direct exposure to potential Trump-era tariffs would be limited. Unlike China, Mexico, or the European Union, the UK does not run a significant trade surplus in goods with the US. Trade in goods between the two nations is broadly balanced, with the UK’s services exports—twice the value of its goods exports—unlikely to be affected by tariffs.

Capital Economics estimated that a hypothetical 10 per cent tariff on all UK goods exported to the US would result in a negligible impact on UK GDP, ranging from -0.1 per cent to +0.1 per cent. This is due to the likely exemption of services exports and the offsetting effect of a weaker pound, which would make UK goods more competitively priced in US markets.

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US-China trade war risks wiping £8.5bn from UK exports, warns Allianz Trade