Donald Trump’s return to the presidency marks one of the most remarkable political comebacks in modern American history. As the first U.S. president since the 19th century to lose a re-election bid and later reclaim the White House—and the first convicted felon to hold the office—his victory is more than just another election result. It’s a moment both psephologists and historians will debate for decades.
In the weeks ahead, political analysts will explore the factors that fueled his unprecedented return and what it signals for the U.S. However, this huge moment will also have an impact on our own relatively new Labour government. A big one. As the saying goes, “when America sneezes, the world catches a cold”.
The Government’s challenge with a Trump-led America
A second Trump term is far from what No. 10 would have hoped for. Facing an increasingly unstable world and sluggish economic growth at home, the UK government would have preferred the stability and multilateralism a Harris administration might have provided. Instead, they now face the prospect of dealing with a U.S. administration at odds with Britain on issues ranging from Ukraine to climate policy, free trade and Middle Eastern diplomacy.
These issues will be further complicated by the rocky start to relations between Keir Starmer and Trump, particularly after the Labour Party was accused of interfering in the U.S. election by sending volunteers to campaign for the Democrats in October and previous comments from now-Foreign Secretary David Lammy describing Trump as a “neo-Nazi”.
Formally, we can expect the UK government to continue invoking the “special relationship” with the U.S. in the coming months. However, despite appearances, behind the scenes, relations between the two administrations are likely to become increasingly strained. This could have major implications for Labour’s international and domestic priorities.
Implications for Labour’s growth agenda
Labour secured its recent electoral victory on a promise to reignite growth and stabilise public finances. Last month, we saw the first glimpses of this agenda take shape after Chancellor Rachel Reeves unveiled a new budget which included a series of tax changes and spending commitments aimed at stimulating economic growth. Yet, the return of a Trump administration could threaten to derail these ambitions.
Throughout his campaign, Trump proposed controversial economic measures that have alarmed economists, notably his pledge to impose a 20% tariff on all imports and a staggering 60% tariff on Chinese goods to address the U.S. trade deficit.
For the UK, which enjoys a substantial trade surplus with the US—primarily driven by the service sector— this could be disastrous. Indeed, the National Institute of Economic and Social Research (NIESR) has already projected that if implemented, these tariffs could reduce UK growth by up to 1.2% in the first two years of Trump’s presidency, wiping out much of the gains from the recent Budget’s tax and borrowing fuelled investment drive.
Such a hit to the economy would have major implications for an already fragile post-Brexit economy, affecting everything from business confidence to inflation rates, sharply limiting foreign direct investment and potentially reducing British exports to the US. This could hugely impact Labour’s ability to stimulate growth and would risk eliminating any slim fiscal headroom which was carved out in last month’s budget.
A Silver Lining? Labour’s Opportunity to Reset UK-EU Relations
These potential tariffs underscore a broader challenge for Labour in adapting to a more isolationist U.S. This isolationism may not only send shockwaves through the economy but could also lead to a fundamental reshaping of the global order, particularly in Europe.
One of the most pressing concerns is Trump’s stance on Ukraine and NATO. His criticisms of Biden’s Ukraine policy have fueled fears that he may withdraw U.S. support, leaving Ukraine vulnerable to Russian aggression. Moreover, Trump is at best, indifferent to the US’s commitment to NATO and if he were to follow through on previous threats to pull out of the alliance — something many commentators consider a real possibility — this would have major implications for the UK and Europe’s long-term security.
Brexit complicates this situation further. With the UK now outside the EU, Labour faces the delicate task of avoiding being squeezed between two potentially protectionist economic superpowers: a Europe keen on consolidating its single market, and a Trump-led U.S. potentially implementing tariffs and scaling back international commitments.
Perhaps one silver lining on all this is it may well lead to a reset in UK-EU relations as the government seeks to find a balance between the two blocs – something that many in Labour favour as part of a gradual re-approach to Europe.
Labour’s focus on growth, particularly in high-skill sectors like green energy and technology, aligns well with European priorities, and with US security assurances in question, further security integration with our European partners could provide the answer to longer-term questions on European security.
For now, the immediate diplomatic priority of the UK government will be to repair any damage caused during the row over Labour’s perceived support for the Democrats during the election campaign. However, as we begin to see more from the incoming Trump administration, the recalibration of UK-EU relations as a more long-term strategy for Labour may become more necessary than ever. AnalysisRead Inflect’s analysis setting out the Trump victory will impact UK policyWe have examined how the Trump win might play out on a range of UK policy areas from growth to defence and trade.Read the report
