Title page 1

Contents 1

ABSTRACT 1

1. INTRODUCTION 2

2. THE POLITICAL ECONOMY OF TARIFFS: THEORY AND EVIDENCE 2

2.1. THEORETICAL INSIGHTS: WHY TARIFFS APPEAL, AND WHY THEY BACKFIRE 2

2.2. EVIDENCE FROM EXPERIENCE: THE 2018 TRADE WAR AND HISTORICAL LESSONS 3

2.3. IMPLICATIONS FOR CURRENT POLICY 3

3. US PROTECTIONISM 4

3.1. HISTORICAL CONTEXT 4

3.2. THE 2018 PRECEDENT 4

3.3. THE 2025 ESCALATION 5

4. TRADE IMPACTS: EVIDENCE AND PROJECTIONS 5

4.1. TRADE FLOW EFFECTS AND MARKET ADAPTATIONS 5

4.2. MODELLING THE ESCALATION 6

4.3. UK IMPLICATIONS: NAVIGATING BETWEEN GIANTS 7

5. CONCLUSION AND POLICY IMPLICATIONS 9

APPENDIX 10

REFERENCES 12

Table 1. Stockpiling and safe-haven responses to tariff announcements 5

Table 2. Long-run impact of 7 August 2025 US tariffs (Percentage changes from baseline) 6

Figure 1. Evolution of US trade policy and average tariff levels 4

Figure 2. Effect of US bilateral trade 8

Figure 3. Effect of UK bilateral trade 8

Appendix Table 1. US tariff escalation, 2025 10

Appendix Table 2. Simulation scenario changes in tariffs. Percentage points 11

Appendix Figure 1. US goods trade with the world (January 2024-June 2025) 10

Appendix Figure 2. US top trading partners (January-June 2024 vs. January-June 2025) 11