Modelling the economic impact of US tariffs on Scotland and the rest of the world: technical paper

Executive Summary

This report explores the modelled impact of various US tariffs and retaliations to them on the Scottish economy. It sets out the scenarios modelled, the detail of the structural gravity methodology and the key results on the impact on the Scottish economy as a whole, as well as at a sectoral level. We also consider the impacts on the rest of the UK and the rest of the world.

The scenarios modelled include most of the already-announced US tariffs as of June 2025, retaliation by China and Canada, and hypothetical proposed tariffs on pharmaceuticals and semiconductors. Bilateral agreements to reduce tariffs between pairs of countries are not modelled.

The modelling utilises the structural gravity methodology, using a well-established approach in the trade literature to approximate changes in trade flows and explore the magnitude of potential economic effects.

We find that the tariffs can have a significant global impact, resulting in the world economy being 0.3% smaller in the long run. The most affected countries are the USA, Canada, Mexico, and China. The overall impact on Scotland and the rest of the UK is found to be very small.

Sectoral impacts on Scotland vary, with some winners as well as losers. The likely impact is estimated to be small in either direction, with exports in most sectors affected by less than 1% in the long run.

This modelling focusses on the impact of changes in trade costs. The increased uncertainty and supply chain disruption could also have an impact, not captured in these results.