ANALYSIS of the US election result emphasises personalities and politics. But, although the economic impact on Scotland might be harder to calculate, it is where attention might now best be focused. The US remains Scotland’s single biggest single trading partner excluding energy, and the prospect of trade fiction driven by higher US tariffs could hit us harder than other countries in Europe. Following Brexit, and the problems that has created for Scotland’s exporters, many had hopes that the US market would fill the gap. Viewed from a US perspective, it is easy to see that its own trade imbalances are fuelling the rhetoric – the UK as a whole exports much more across the Atlantic than it imports in return. This year the US accounts for more than 17% of total UK trade.

Overall, UK as an open trading economy is more vulnerable that most to protectionism and the recent trend for countries to onshore production and encourage domestic industries. In a world of conflict and slower growth, each nation’s emphasis has moved to build resilience and negotiate harder on trade.

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Unfortunately, tariffs are a blunt instrument, often with sudden and disproportionate impact, forcing sharp retrenchment in export activity. Replacement markets may be harder to find – trade risk comes just as growth is slowing in Europe and China. These economies are faltering, with weakening domestic consumption. Scotland punches well above its weight in food and drink exports, representing over 30% of the UK total. These are key sectors for the Scottish economy, enjoying strong growth in recent years. The possibility of re-opening talks with the new US administration on free trade is welcome but food would certainly be part of that.

Any deal is likely to improve access by US food manufacturers into the UK market, possibly compromising standards. Scotland is disproportionately exposed, but our high-quality food exporters should benefit. Underlying a more assertive US stance on trade is a more subtle issue of competitiveness. Already there are signals that climate change will move down priorities, with the new administration believing that the US electorate has delivered a mandate to reject the taxes and short-term cuts in living standards associated with net-zero carbon emissions. This is bad news for the planet.

It also makes US manufactures more competitive versus nations that are working to reduce emissions. Competing nations paying for carbon reduction end up embedding higher costs into their products. The US believes that economic growth is supported by low energy costs, and for the foreseeable future that will be mainly carbon-based. Since 2019, the nation has been a net exporter of energy.

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Viewed through the US lens, drilling not only keeps a plentiful supply of oil and gas but also supports its economic resilience. This is at odds with Europe’s perspective but will represent an additional competitive advantage for the US in many industries. Many consumers will continue to pay more for sustainable products, but the cost may be more apparent. Whether there is the international co-operation to challenge this narrower view of trade and climate responsibilities is in question.

The global order is changing, weakening some long-established institutions that previously brought cohesion on issues like climate change. More countries may now take their cue from the US and those doing little on net zero and move their stance to a reactive one. Rather than aiming for an early target date for cutting emissions, they would just focus on mitigating the climate consequences at home as global temperatures inevitably rise. The planned US move on the environment and sustainability will force reappraisal of the pace of climate policies everywhere. For trade, currency is also key. In an imbalanced world, competitive devaluations are now a bigger risk.

China would be the main target of the planned US tariffs and this prospect has already driven weakness in the Chinese currency. We can expect a renewed push by China to boost its exports – more of a challenge to manufacturing nations like Germany than Scotland’s service-oriented economy. But China may also react to its disappointing growth by cutting back in ways that affect Scotland. China has many students at Scotland’s universities. There is still no sign that this will reverse but Scotland has a higher proportion of Chinese students than the rest of the UK. The US threat to global trade and growth may only gradually emerge as tariffs are phased in.

Fortunately, some caution might be forced on the US, even with its vibrant economy, strong technology and with the dollar as global reserve currency. US economic growth has been supported by ever higher borrowing – by some measures its debt is now higher than European averages as a proportion of its economy. With a reserve currency this is manageable, but at the cost of inflation.

Stock markets have begun to signal that higher US inflation and borrowing costs are likely consequences of the new policies. This constraint on borrowing to boost growth may apply more widely to other nations. Government bonds everywhere are reacting badly to the prospect of tariffs and trade frictions – showing investors fear a lack of fiscal discipline. Governments may be tempted to borrow more to help flagging economies and counteract any setback on trade. The stock market warnings suggest that without restraint in borrowing, the world may be set for more expensive borrowing and a further squeeze on household budgets.

Why the US might want to borrow more and cut taxes is easy to see. US policies and economic growth have propelled US shares up eightfold in 15 years, to a level where they now represent 70% of the global total. That gives US firms a lower cost of capital in addition to their cheaper energy.

But what seems good for US business may not be sustainable, and tariffs will hit world trade. Scotland can expect some challenges from this, even if a trade deal brings some opportunities.

Colin McLean is a director of SVM Asset Management Holdings