During the US presidential election campaign, Donald Trump made a number of pledges to impose tariffs on foreign goods, a move he claimed would help protect American jobs.
Following his election to the White House, the President duly followed through with this promise, announcing most notably a baseline tariff of 10% on all foreign imports to the US in early April.
Some nations, however, received much higher levies: China received the highest rate, rising to 145% just a week later – although the US and China have since reportedly reached an agreement to cut rates back to 55%, pending final approval – while US neighbours Canada and Mexico faced a 25% tariff on most exports.
In the context of widespread trade levies, it’s no surprise that many commentators believed the ‘historic’ trade deal the UK signed with the US to reduce tariffs on steel, car exports and agriculture may lead the country to actually benefit from the President’s new trade policy by securing a competitive advantage over other nations facing higher rates.
But despite the apparent warm ties between the US and UK, Britain should nevertheless address its concerning dependence on the US for the most fundamental digital services, which leave its tech sector at risk of economic instability.
An October 2024 study conducted by researchers from Sussex University and King’s College London, for example, found that 48% of facilities suppling the UK’s semiconductor industry are located in the US.
Semiconductors are foundational to the modern economy – a recent PwC study anticipated that the sector’s revenues will grow at more than twice the rate of global GDP to over $1 trillion by 2030.
But as concerns over the security of supply chains increase and nations take steps to reshore the production of a strategically vital product, semiconductors may be affected by rising geopolitical tensions.
It’s no wonder that techUK, a trade association that brings together government and business stakeholders across digital sectors, recently called upon the British government to accelerate the implementation of its National Semiconductor Strategy.
Cloud infrastructure is equally vital to the data-intensive AI and computation technologies that are powering significant productivity gains across all sectors of the economy.
But again, the UK is highly reliant on the US in this regard: provisional research conducted by the British government this year found that the UK’s two largest providers of cloud infrastructure Amazon Web Services and Microsoft, both of which are US based, account for 30-40% of the UK market each.
And as uncertainty over US trade policy persists, even the slightest potential of an interruption of access to cloud infrastructure is concerning enough to warrant significant investment in the UK’s own data services.
Of course, decision-making over semiconductor manufacturing and cloud infrastructure lies in the hands of national governments. But as global instability only looks set to increase, businesses should also review their strategic vulnerabilities and take pre-emptive action to protect themselves.
Given the lessons the UK should learn from its dependency on the US, it would be not be advised to shift our digital infrastructure entirely from an American provider to their European, Japanese or Chinese replacement.
But it’s easy to envisage the model of a company whose cloud infrastructure is provided by France’s OVHcloud, whose data analytics is provided by Japan’s NEC Corporation, and whose on-site video security is provided by China’s Dahua Technology, to mitigate the risks of overdependence on one nation.
In our uncertain times, diversification is the only way to navigate a route through a highly unpredictable global economic environment.
The British government and businesses should recognise the risks of tech dependency and begin to take tangible measures to diversify our digital economy.
