Decision Time: The UK’s Trade Policy Challenges for 2025
The UK faces critical trade decisions in 2025, impacting its economy and business confidence. Key focuses include rebuilding EU ties, advancing the GCC free trade deal, and addressing US-China dynamics under Trump. A clear, cohesive policy framework is urgently needed.
As 2025 approaches, the UK faces pivotal trade policy decisions that could shape its economic future. The European Centre for International Political Economy (ECIPE), in its recent article titled “Decision-Time – The 2025 UK Trade Policy Stocktake” (7 January), highlights the pressing challenges and opportunities ahead. With Donald Trump returning to the US presidency, the stakes for the UK’s trade policy are even higher. Decisions made in 2025 will significantly impact economic performance and business confidence.
The Current State of UK Trade Policy
Since leaving the European Union, the UK has struggled to establish a cohesive trade strategy that attracts foreign investment while balancing competing priorities, such as immigration reform and net-zero commitments. Despite its support for open trade and improved relations with neighbours, progress has been slow. A clear and practical approach is desperately needed to address these challenges and deliver tangible outcomes.
Key Trade Relationships to Watch in 2025
1. The GCC Free Trade Agreement:
Negotiations with the Gulf Cooperation Council (GCC) are ongoing, with the potential to unlock foreign investment opportunities. However, economic gains are likely to stem more from investment than export growth. The inclusion of investor-state dispute settlement (ISDS) clauses in the agreement could spark concerns among unions and civil society, potentially delaying progress. Meanwhile, other trade deals, particularly with India, remain at a standstill.
2. Rebuilding UK-EU Relations:
Strengthening ties with the EU is widely regarded as essential, yet mistrust and secrecy have limited progress. Both sides are working towards a preliminary agenda covering issues such as:
• Economic security cooperation
• Defence agreements
• Veterinary standards
• Youth mobility
• Carbon trading
These topics will be tabled at a UK-EU Summit in the first half of 2025. However, internal disagreements within the UK government, particularly around youth mobility and food standards, pose significant hurdles.
3. The Trump Factor:
Donald Trump’s presidency could reshape the dynamics of UK-EU relations. The US might introduce tariff threats, oppose carbon border adjustment mechanisms, or propose unique trade deals. Within the UK, the Conservative Party could pressure a Labour-led government to secure a traditional trade agreement with the US. Moreover, Trump’s administration may push the UK to realign its trade policies with China, adding complexity as the Prime Minister plans a visit to Beijing. Internal divisions within the UK government over its China strategy make balancing security and economic priorities particularly challenging.
A Shift in Strategy: What the UK Needs
The ECIPE analysis argues that the UK must move beyond traditional country-specific trade agreements. Instead, a comprehensive and predictable policy framework is essential to provide stability and long-term benefits. While joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a step in the right direction, its immediate impact on UK trade has been minimal.
The UK’s upcoming World Trade Organization (WTO) trade policy review will further test its trade strategy. While the UK has not shown significant protectionist tendencies compared to other WTO members, several areas are likely to face scrutiny.
What Lies Ahead?
The true test for 2025 will be whether the UK can deliver meaningful improvements to its economic performance. Deepening cooperation with the EU will be crucial, but success will require transparent goal-setting and collaboration across sectors and stakeholders. As the ECIPE article concludes, the government must establish realistic and actionable objectives to restore confidence and build a resilient trade policy.
This pivotal year offers the UK an opportunity to redefine its position on the global stage. By embracing comprehensive policies and fostering international collaboration, the UK can navigate the challenges ahead and secure a prosperous future. Stay tuned as we follow the developments in the coming months!
