With just hours to go before the US elections, the UK will be watching and waiting to see if former President Donald Trump or Vice President Kamala Harris is capable of taking victory.

But how could the winner of the US election actually affect the UK economy?

1. Tariffs and trade wars

Former President Trump has promised to implement blanket 10 percent trade tariffs on all U.S. imports.

Analysts have predicted that if their plans are implemented, European exports to the United States will fall by around €150bn (£126bn) a year.

Since the United States is one of the United Kingdom’s largest trading partners, any impact on exports could hit companies that rely on sales to American consumers.

Additionally, Trump has promised a 100 percent tariff on imported vehicles, and cars are a major export from the United Kingdom to the United States.

Tariffs on automotive companies such as Jaguar Land Rover could harm the UK economy due to job losses. It will be difficult for the car company to find another market to replace the United States if tariffs hurt American demand for cars made in the United Kingdom.

However, Harris is also not averse to using tariffs. While not as radical in trade wars as Trump, Democrats have been increasingly using them, such as Biden’s taxes on solar cell imports.

2. Interest rates and the US elections

The interest rate set by the Federal Reserve It has a wide range of implications for the United States and, as the dollar is the world’s reserve currency, the central bank’s policies have a knock-on effect in the United Kingdom.

If he wins the US election, Trump’s tax plans, which are expected to repeat his $1.9 trillion bill from 2017, could also increase the already significant US deficit, worsening inflation.

“During his first presidency, Donald Trump promised to reduce the US national debt,” said Santa Zvaigzne-Sproge, head of investment advisory at Conotoxia.

“Instead, the US national debt grew by $7.2 trillion in four years while Trump was in the White House – about 30 percent of the total national debt at the time.”

Analysts have warned that Trump’s policies of higher tariffs and mass deportation of migrant workers could also increase inflation, forcing the Federal Reserve to keep interest rates high longer.

Harris is also expected to increase borrowing, although not as much as Trump, as she plans to raise taxes on the wealthy to pay for some of her biggest spending plans.

3. The FTSE 100

Although companies listed on the FTSE 100 and FTSE 250 may be based in the UK, they are internationally focused indices.

With the FTSE 100 making 80 per cent of its profits overseas and the FTSE 250 making about half, any slowdown in the US economy could have a substantial impact on the performance of its constituents.

UK-listed companies with the most exposure to the United States include BAE Systems, which sells defense systems to the US government, and Rolls Royce.

Rolls Royce is the best performing FTSE 100 this year. However, after hitting an all-time high on October 17, the stock has been trading sideways.

“This suggests that investors are being cautious about increasing long positions in Rolls Royce due to election risks in the United States,” said Kathleen Brooks, head of research at XTB.

“The energy sector in the UK is also exposed to global growth trends; if Trump’s tariffs impact global growth, then this sector could also come under further downward pressure in the coming months,” he added.

4. Defense and American elections

Jason Hollands, managing director of Bestinvest, noted that Trump has been openly anti-Ukraine and has promised to withdraw US financial support for the war effort.

He said this would likely cause aerospace and defense stocks to fall in the event of a Trump win or a rally on the back of a Harris win, with many FTSE 100 stocks focused on the area.

Furthermore, Trump’s withdrawal of aid to Ukraine would likely leave countries like the United Kingdom trying to fill the gap with more military aid, which could boost the UK government’s spending on foreign aid and defense.

Meanwhile, a Harris victory would likely spark a surge in defense action, a sharp shift from previous elections in which Republicans were typically seen as more cost-effective in military spending.

5. Green subsidies

Harris would likely continue Biden’s agenda of investing in renewable energy, leading to a continued rise of sustainable businesses in the United States.

By contrast, a Trump victory in the US election will likely cause shares in British companies focused on renewable energy to fall, “given his commitment to halt all offshore wind projects by executive order on his first day in office.” position,” according to Tancrede. Fulop, senior equity analyst at Morningstar.

Orsted could be a particularly hard-hit stock, although Fulop noted that the company’s two US offshore wind projects currently under construction have already received federal authorization.