How Donald Trump’s tariffs could create Scotland’s biggest Brexit dividend

Donald Trump’s decision to impose twice the tariff on the EU as on the UK gives firms based here an advantage

Back in the halcyon days of 2007, none of us could have imagined that we were living in a fin de siècle period of economic boon. As we maxed out on our credit cards to pay for easy-to-obtain mortgages, and a fun new gadget called the iPhone, we were living blithely on the cusp of a series of unprecedented shocks that would rock the Scottish economy and change our lives forever.

The 2008 financial crash and subsequent recession, the era of austerity, Brexit, the Covid pandemic, and the war in Ukraine have impacted each of us in separate ways. The lucky ones may have seen their standard of living fall as their pay failed to keep pace with rising fuel bills and supermarket prices. The not-so-lucky may have been made redundant, lost their businesses or, worse, their homes.

Now Scottish resilience is being tested again, perhaps to a greater extent than ever before, by the unpredictable global economic forces unleashed by Donald Trump's escalating tariff war. The US president’s actions threaten not only trade with the US, but the integrity of the economy, as we battle to find new markets for our exports and to prevent this country being flooded with cheap imports by those locked out of US markets.

Donald Trump displays an executive order imposing tariffs on imported goods during his 'Make America Wealthy Again' trade announcement at the White House (Picture: Andrew Harnik) | Getty Images

Importance of life sciences industry

Trump’s tariffs also promise to test the resilience of the fragile relations that have existed between Britain and the European Union since Brexit. The UK's departure from the EU ignited a heated debate about its impact on the Scottish economy and, for those with a dog in the fight, upon its thriving life sciences sector.

The US remains the dominant market for UK medtech, biotech and pharmaceuticals, and Brexit hasn't altered this crucial relationship. Scotland’s strong talent pool, nurtured by world-class universities and research institutions, continues to attract investment and drive innovation.

The UK life sciences sector, of which medtech is a significant component, demonstrated remarkable resilience during the Covid pandemic. The rapid development and deployment of vaccines, often attributed to the UK's newfound regulatory autonomy following Brexit, stands as a testament to this resilience.

There are those who believe a trade war will push the UK back towards Brussels, while others argue that it's more likely to exacerbate existing tensions and create new ones. This divergence is already evident in the decision by the formerly pro-EU Keir Starmer to chart his own course for Britain.

UK’s competitive advantage over EU

The 10 per cent “retaliatory tariff” imposed on the UK is half of that applied to the EU, presenting this country with a nominal competitive advantage in US trade and, some would argue, the most significant vindication of Brexit yet.

This difference in approach is likely to only widen as the US-EU trade war escalates. Significant tariff differentials could incentivise circumvention, with EU companies and individuals potentially using the UK as a backdoor for cheaper American goods.

The potential for resentment from Brussels is high. Should the UK secure preferential access to the US market for key industries, including life sciences, while the EU faces barriers, transatlantic tensions will inevitably spill over into the UK-EU relationship.

Prioritising its national interest will require the UK to resist any form of customs union with the EU. Such an entanglement would force the UK to adopt EU trade policies, including retaliatory tariffs, hindering its ability to negotiate independently with the US.

Brexit’s effect on recruitment

The UK has already weathered the bureaucratic hurdles of Brexit and there is no suggestion that Brussels would cut UK firms any slack on these in return for Britain aligning with the EU in a trade war.

In the life sciences sector, the need for separate regulatory approvals from the European Medicines Agency adds a significant burden on Scottish and UK businesses – nearly half of UK medtech exports are destined for the EU – placing them at a competitive disadvantage.

Any future disruptions in trade relations or changes in US regulations could have a disproportionate impact on Scottish life sciences. Brexit has also made attracting and retaining top talent more challenging. The end of free movement of people within the EU means skilled professionals from EU countries now face stricter visa requirements.

This is compounded by the UK Government's decision to raise the minimum salary threshold for skilled worker visas, making it more difficult for companies to recruit foreign graduates. These restrictions risk hindering Scotland's ability to compete on a global scale, potentially leading to a brain drain as talent migrates to more accessible markets.

Making the best of new opportunities

While the UK Government has pledged to invest in life sciences research and development, questions remain about its ability to match the funding levels of EU counterparts, particularly in the face of economic uncertainty.

The potential loss of access to Horizon Europe, the EU's flagship research and innovation funding programme, would be a significant blow to the UK's research ecosystem. Although the UK has rejoined Horizon, delays and funding uncertainties have already impacted research collaborations and funding opportunities.

Despite all these challenges, Scottish companies have made the best of new opportunities presented by Brexit, which has given the UK the autonomy to forge new trade deals and tailor regulations to its advantage.

The government's focus on positioning the UK as a "science superpower" through initiatives like the "Life Sciences Vision" offers a roadmap for future growth. This includes attracting investment, boosting research and development, and strengthening the NHS's role as an early adopter of innovative technologies.

Rather than succumbing to an unthinking return to the European fold, Trump's tariff wars present a unique opportunity for Scotland and the UK.

Ivor Campbell is chief executive of Angus-based Snedden Campbell, a specialist recruitment consultant for the medical technology industry