SCOTLAND’S flagship food and drink industry has suffered a “major blow” as a result of US tariffs but other sectors of the Scottish economy will also “suffer massively”, it has been predicted.
“Scotland has vibrant sectors in engineering, advanced manufacturing, and financial and business services, which are all exporting to the US market and will feel the effects of these trade barriers,” a spokesperson for the Scottish Chamber of Commerce told the Sunday National.
Pharmaceuticals and chemicals are another significant export to the US that will be negatively affected, according to Dr João Sousa, deputy director of the Fraser of Allander Institute at the University of Strathclyde.
“Life sciences are a big sector, particularly around Edinburgh, and we export a lot of pharmaceuticals and chemicals to the US so those will be hit,” he said.
“Not only do we export quite a lot but every unit we export is quite high value and because it is high value the 10% tariff amounts to quite a lot of money. As a result, their market will be reduced or be made harder to access because their customers will have to pay more.”
While a lot of publicity has been on the potential effects of the US tariffs on Scottish salmon and whisky, Sousa said that the financial services sector was also likely to take a knock.
“Financial services are a big part of the Scottish economy and if you have got less international trade going on because of the tariffs there will be less demand for things like advice on exports,” he said.
“It’s not just the goods that are tariffed, it is also the ancillaries that are supplied alongside those. Those are important to consider.”
According to HMRC’s Regional Trade Statistics, in 2024, the total value of Scottish goods exports to the USA was £3.26 billion. This included £975.6 million in drink exports, including £971m in Scotch whisky exports, £440.5m in power generating machinery exports, £428.4m in medicinal and pharmaceutical exports and £225m in Scottish salmon exports.
Other top-performing Scottish goods export products to the USA include professional and scientific instruments, valued at £209.7m in 2024 and chemical materials and products, valued at £190.1m in 2024.
The latest estimates from Exports Statistics Scotland show that Scotland’s top service export to the USA was in financial and business services, valued at £1.11bn in 2021.
While financial services are concentrated near the cities, rural areas will not be immune to the effects of the tariffs, said Sousa.
“Distilleries tend to be in rural areas and tend to be very large employers in those areas,” he pointed out. “Rural areas are not particularly abundant in high wage jobs so there could be more localised impacts there.”
Job losses and closures in the sectors cannot be ruled out but Sousa said he didn’t want to “overegg” the negative effect on the economy.
“We are not going to have a depression or anything like that but it is going to make it harder at the margins and the economy could be quite hard hit,” he said.
“We may or may not tip into recession but it is not like we are going to become massively poorer overnight.
However he added: “We are good at producing particular things that are not produced anywhere else but now they are being taxed to a point where they are not as competitive as they used to be and there could be job losses. Closures depend on how resiliant they are.”
US president Donald Trump has imposed a tariff of 20% on EU goods but Sousa said this did not mean the UK was in a better position now it was out of the EU.
“The EU is our biggest trading partner if you treat it as a bloc, so if the EU is harder to access [than it was pre-Brexit] and harder hit by the tariffs, then some of your potential replacement customers are not quite in such a good position to buy your goods than otherwise they would have been,” said Sousa.
“We are stuck in this position where we are outside the single market and there does not seem to be any movement towards us aligning more closely with it.”
Finding other markets will be difficult, he predicted.
“Moving from one country on which you rely on a lot for your exports to another is hard to do,” Sousa said.
“It takes time to adjust and it can require capital as you might have to change production methods – even things like bottling regulations might be different. It can be an expensive headache and if you have just had a shock to your income then there is less capacity to invest.”
Sousa did not hold out much hope that there would be any UK Government help for business to withstand the tariff shock.
“The Chancellor did her best to eke out every pound she could in her latest forecast and that has been completely derailed already,” he said.
Meanwhile, a new survey of Scottish mid-market businesses found that more than a third (34%) expect to be directly affected “to a significant extent” by the US’s tariffs.
The survey by accountancy and advisory firm BDO of 500 mid-market businesses found that 66% said they would be affected “to some extent”.
No respondents said they would not be affected.
