The re-election of Donald Trump was always expected to be an unpredictable rollercoaster. But few predicted the scale of the chaos unleashed by the president’s actions over the past week. 

After Trump imposed sweeping tariffs on all countries on so-called ‘Liberation Day’ last week, financial markets plunged into chaos – with stock markets nosediving and bond yields soaring. But after mounting pressure from Wall Street and growing fears of a looming recession, Trump announced a 90-day pause on new tariffs for most countries. In place of the highly dubious “reciprocal” tariffs that ranged from 10% to 46%, all countries – including the UK – will now be subject to a 10% baseline tariff on nearly all goods entering the US, in addition to existing 25% tariffs on aluminium, steel, and cars. The big exception to this is China, where Trump has escalated tensions by increasing tariffs to 125% – which China has now reciprocated. 

While many breathed a sigh of relief at the u-turn, the compromise still represents the highest tariffs the US has imposed in more than a century. Crucially, few expect the status quo to represent a stable settlement. Trump has made it clear that his administration is using tariffs to bring countries to the negotiating table, weaponising the US’s economic power to force other countries into line. So what might Trump’s trade war mean for Scotland’s economy, and that of the UK more broadly?

The most immediate impact of the tariffs on Scotland’s economy will be on our major exporting sectors. Aside from trade within the UK, the US represents Scotland’s second largest trading partner after the European Union (EU) – with Scotland exporting £3.8 billion of goods across the Atlantic in 2024. When oil and gas is excluded, the US is the top export destination for Scottish goods exports, much of which come from Scotland’s food and drinks sector. 

The US remains the largest export market by value for Scotch whisky, although the sector has struggled in recent years – thanks in part to policies enacted during Trump’s first presidency. In 2019, the Trump administration imposed a 25% tariff on Scotch whisky which led to a sharp decline in exports to the US – resulting in over £600 million in lost sales over the next 18 months. Last year Scottish firms also exported £225 million of salmon to the US, making it the second most valuable export market for Scottish salmon after France. Beyond the food and drink sector, Scotland also exports large amounts of other products to the US including pharmaceuticals, chemicals and machinery.

Given how crucial these exporting sectors are to Scotland’s economy, any slump in sales to the US has the potential to harm growth and employment at a time when Scotland’s economy is already facing a slowdown. While this risk should not be underestimated, the biggest dangers from Trump’s erratic policymaking lay elsewhere. 

While it is tariffs that often grab the headlines, Trump’s bigger concern lies with so-called ‘non-tariff barriers’. These represent countries’ regulatory measures such as food safety laws, environmental standards, and product regulations. Trump has long criticised European regulations as "unfair trade practices," particularly targeting the EU’s strict food and environmental regulations. According to Trump, these standards disadvantage American producers which face far fewer regulations in the US – and whose products do not always meet European standards. For example, EU bans on hormone-treated beef, chlorinated chicken, or genetically modified crops have long been criticised by Trump’s allies as unfairly penalising US companies. 

Last week Trump’s trade adviser Peter Navarro described non-tariff barriers as being "orders of magnitude" more important than tariff rates, and the administration has made it clear that it intends to use the threat of tariffs to reduce such barriers and obtain greater access to European markets for US companies. If successful, this war against non-tariff barriers could quietly undermine the regulatory foundations of many European economies, including key protections that citizens rely on daily. Given Trumps’ repeated climate denial, there is also a risk that this could include a watering down of environmental protections and net zero commitments. 

For Scotland, much will depend on the UK Government’s ongoing efforts to secure a trade deal with Trump’s America, and whether Keir Starmer’s team yields to pressure applied by Trump to avoid tariffs. Given the gulf in bargaining power between the US and UK, and Trump’s notoriously aggressive deal-making, this would almost certainly involve bowing to demands to open up key British markets – such as agriculture and pharmaceuticals – to American competitors. This in turn could have a material impact on peoples’ everyday lives, from lower food standards to significantly higher NHS drug prices.

Perhaps the biggest threat to the global economy comes not from Trump’s trade policies directly, but from the uncertainty and chaos his actions have unleashed. Capitalist economies run on the basis of confidence and expectations: if people feel optimistic about the economy, businesses will invest and households will spend. But when there is widespread fear and uncertainty, spending and investment is scaled back, which then has a compounding effect through the spending multiplier. 

A wide array of indicators now show that Trump’s actions have dramatically undermined business and consumer confidence in the US. Together with the direct effects of the tariffs, many analysts are now predicting that the US will enter a recession later this year – potentially taking the rest of the world with it. 

As well as eroding living standards even further across the UK, this could also have a significant impact on fiscal policy. Last month Rachel Reeves’s Spring Statement, which imposed swinging cuts to welfare, left precious little fiscal ‘headroom’ available to absorb any unexpected chocks. If the economic outlook continues to deteriorate, this headroom could easily be wiped out by the time of the Autumn budget. Unless the chancellor is willing to change her fiscal rules or row back on election pledges to not raise taxes, this could lead to more devastating cuts to public spending. This in turn may result in cuts to the Holyrood’s devolved budget, which in turn could significantly undermine the Scottish Government’s commitment to deliver net zero, eradicate child poverty and public services. 

While it is easy to dismiss Trump’s actions as the erratic whims of a narcissist, there is a strategy behind the madness – albeit a tenuous one. In reality, the recent tariffs form part of a long-term plan to radically reshape the international order in his own image. 

Since the Second World War, the global economic order has been anchored by American economic and military hegemony, with the US acting as the primary architect and guarantor of an international system organised around global trade, multilateral cooperation, and the dollar as the world’s reserve currency. This has delivered tremendous benefits for the US, which has enjoyed unparalleled prosperity and military dominance

In Trump’s view however, things look rather different. Instead, he believes that countries have been exploiting the US – both by receiving military protection without paying, and by selling more goods into the US than they buy in return from it. 

The logic behind Trump’s global reordering was clearly set out in a recent speech by the chair of the Trump’s Council of Economic Advisers, Stephen Miran. According to Miran, the US provides two main “global public goods”: firstly, a “security umbrella” overseen by the US military; and secondly, the US dollar and Treasury securities, which are used as the main reserve asset in the international financial system.

“If other nations want to benefit from the US geopolitical and financial umbrella, then they need to pull their weight, and pay their fair share”, he went on to say. In practice, Trump wants other countries to pay the US more to maintain its global financial and military empire, while granting greater access to US corporate interests. And he wants to abandon multilateralism in favour of a more transactional and unilateral approach to diplomatic relations, where treatment by the US is based on loyalty and economic subservience. 

It is in this context that the recent tariffs debacle should be viewed. In a paper published shortly before his appointment in November 2024, Miran outlined how the US should use not only tariffs but also the threat of withdrawing its security support to compel its friends and allies to fall into line. The plan also involves forcing countries to make coordinated currency interventions to devalue the US dollar to help revive US manufacturing and stave off competition from China – all while retaining the dollar’s status as the world’s reserve currency.

The strategy represents a high-stakes gamble of the highest order that is riddled with flawed thinking contradictions. But if implemented in full, it would mark the biggest shake up to the global economy since the collapse of the Bretton Woods system in 1971 – and could have a hugely significant impact on Scotland’s economy, as well as our national security. 

Whether Trump will achieve this is far from certain. In the meantime, it’s clear that his weaponisation of US power poses a threat to peace, prosperity and the planet – and countries including the UK must work together to contain it.