How can the UK respond to global protectionism? 

The consequences of protectionism 

Since January of this year, $10 trillion [El Pais, 2025] has been wiped from the stock markets by the tariffs placed by the US, threatening to place the global economy in a negative feedback loop as trade restrictions heighten geopolitical tensions, triggering economic fallout among interdependent nations reliant on shared markets and industrial inputs, as seen in U.S. tariffs raising input costs and weakening domestic industry. 

What drives protectionism? 

 Protectionism is driven by four key factors: protecting/fostering domestic industries (e.g. “Make in India” in 2024), ensuring resource self-sufficiency (India rice export ban in 2023), rising political populism (US-China tariffs in 2025), and environmental concerns (EU carbon tariffs in 2023). In this article, 2 solutions will be discussed. Firstly, the UK can adopt Strategic Trade Theory to cultivate globally competitive industries, where foreign demand will naturally foster bilateral trade.  Secondly, the UK can adopt Supply Chain Risk Mitigation (SCRM) to insulate itself from geopolitical volatility driving the global shift away from free trade. 

Figure 1 [Statista, 2025] 

Strategic trade theory 

Strategic Trade Theory (STT) challenges the belief that economic welfare is maximized by the free market that encourages efficient distribution of resources. Instead, it encourages targeted government intervention. These advantages may include export subsidization, R&D investment, and tariffs for the protection of infant businesses. The aerospace industry is a salient reminder of the advantages of STT. The EU government funding for R&D and infrastructure as well as soft loans, aided the rise of Airbus in competition with Boeing, turning the aerospace market into an oligopolistic market, establishing Airbus as a leading exporter of high-valued goods, as well as encouraging innovation. This incentivized increased trade engagement with France by other nations.  

While this theory has its risks, notably inefficiency and tariff dispute [Brandon&Spencer,1984], the benefits far outweigh the costs. When carefully calibrated, STT will bring about prosperity despite the erosion of multilateral trade. While inefficiency arises from the influx of capital from the government, it is key to note that the gradual detachment of the government from the company will allow for the eventual efficient functioning of the company, as it faces competitors. Furthermore, the long-term tax revenue far exceeds the potential loss from inefficiency in the initial stages of the company. Companies such as Airbus now employ 125,000 workers [Airbus,2024] in the EU, allowing local economies to flourish due to the multiplier effect, constructing a virtuous cycle. Furthermore, Airbus contributes over €1.3 billion in fiscal revenue [Airbus, 2024], enabling France—its primary beneficiary—to reinvest into encouraging the growth of other global exporters. This illustrates that, despite its controversy, Strategic Trade Theory remains politically sustainable. Moreover, to minimize trade disputes, STT can be applied non-confrontationally—favoring subsidies over tariffs. This is especially suitable for emerging industries focused on technological design rather than physical goods, where tariffs offer little protection but risk greater geopolitical friction. Hence, the STT can be carried out in sectors that have global strategic value, minimal reliance on mass production, and first-mover advantage. For example, breakthroughs in high-growth fields like nanotech or neuro-symbolic AI could position the UK as a global leader, driving trade with nations seeking its technologies. 

Figure 2 [Precedence research,2024] 

Supply chain risk mitigation 

Supply disruptions pose serious risks to national socioeconomic well-being in today’s volatile trade landscape. Supply chain issues can cause industrial output to decline and cause social unrest, threatening investor confidence in the UK economy. A pertinent case of supply chain issues is the OPEC 1973 embargo on oil. OPEC placed embargos on nations including the UK for supporting Israel in their fight against Egypt & Syria, causing Oil prices to quadruple from $3 to $12 [Federal Reserve history,2013] The event had detrimental effects on the UK, including the 3-day work week, effectively halving the work week from 5 ½ days. Furthermore, the event also plunged FT30 by 73%[BBC,2003], resulting in a downward spiral of the economy as investors retracted funding, the cost of capital through equity increasing and consumer spending decreasing, 

As such, the stronger adoption of Supply chain risk mitigation can reduce economic risks for the UK. SCRM includes diversification, friend shoring, and scenario mapping [Donald Waters, 2007]. Diversification is key to the success of the architecture as it reduces the systematic fragility of supply chains. Geological diversification circumvents the risk of natural disasters, local conflict, and changes in resource availability, as these events may lead to countries focusing their resources to meet domestic demands. This is illustrated by the protective equipment insecurity prompted by COVID-19, where the overdependence on Chinese/Indian supplies threatened the UK, as over 80 countries [WTO,2024] passed export bans on medical supplies. Friendshoring is also central, as allies are less likely to impose trade barriers that risk political fallout with the UK. As such, the use of supplier profiling is a requisite for friendshoring. In order to assess supplier reliability, the UK must consider domestic political stability, a country’s bilateral political relations with the UK’s adversarial states, natural endowments and sovereign credit ratings. Which may all shift a country’s protectionist policies rapidly. Moreover, scenario mapping facilitates strategic resilience by enabling the UK to pre-empt unprecedented disruptions through contingency planning and evaluated supply augmentation from a diversified supplier base. Additionally, the diversification of resources places any country that leverages supplies as an economic instrument or turns toward export protectionism at risk themselves, as the curtailment of resources may reduce their cross-border revenue streams. On the other hand, for the UK, this may be a short-term setback, with allied support likely to offset the impact of supply disruption. Thus, SCRMA will enable the UK to navigate through the unforeseen events of the future, allowing the UK to flourish despite more nations turning to a sheltered market approach. 

Conclusion 

In the era where protectionism has resurged, the two solutions above present a potential key to securing the UK economy. However, it is essential that the UK capitalizes on its longstanding relationships with institutions such as the WTO, EU, and IMF to enhance policy effectiveness and to ensure transparency. In addition, the UK must continue to look for solutions beyond the two proposed above. By combining proactive industrial policy with strategic resilience, the UK can navigate a more fragmented trade landscape.