Modelling the economic impact of US tariffs on Scotland and the rest of the world: technical paper
Technical paper on the use of structural gravity modelling which sets out economic modelling on the potential impact of US Tariffs on Scotland and the rest of the world.
Introduction
Since January 2025, the US has implemented historically high tariffs on most countries across a wide range of products. Tariffs increase the costs of importing goods, resulting in reduced international trade, trade diversion as importers seek alternative sources, and reduction in overall demand.
The impact on any given country depends on a wide range of factors, including the applied tariff rate, the previously existing tariffs, and the sectors in which the country in question has a comparative advantage or disadvantage.
In this analysis, we use OCEA’s in-house structural gravity model to explore the potential impact on the Scottish economy of the modelled tariff increases. We also consider the impacts on the rest of the UK and the rest of the world.
We construct the scenarios based on announcements by the US government, as well as those of Canada and China, defined at the product level and taking account of existing tariff rates. This level of detail in the model design, along with the inclusion of Scotland-specific impacts, makes this analysis unique among studies on the potential impact of recent US tariffs[1].
Scenarios
The scenarios modelled are based on announcements by the US and other governments, as well as a few illustrative scenarios based on anticipated future announcements. We present the full list of tariff scenarios below. In this context, “additional” means the new tariff is applied on top of any existing tariff, and “non-additional” means the new tariff replaces the existing tariff.
| Tariff imposed by | Products affected | Tariff Rate | Type |
|---|---|---|---|
| USA | Steel & aluminium | 50% | Non-additional |
| USA | Cars & car parts | 25% | Additional |
| USA | Semiconductors & pharmaceuticals | 25% | Additional |
| USA | All products except those in Annex II of the executive order[2], Cars, Steel, Aluminium, Smartphones. Canada and Mexico not included. | 10% | Additional |
| USA | Non-USMCA-compliant imports from Canada & Mexico [Note 1] [Note 2] | 25% | Additional |
| USA | Non-USMCA-compliant imports of energy sources from Canada [Note 1] | 10% | Additional |
| USA | All imports from China | 20% | Additional |
| China | Selected US products (agriculture, food, coal, machinery) | 10–15% | Additional |
| China | All US imports | 10% | Additional |
| Canada | Selected US products (3 rounds of retaliation, announced on 4 Mar, 13 Mar, 3 Apr) | 25% | Non-additional |
[Note 1]: we assume 50% of imports from Canada and Mexico are USMCA-compliant. We have carried out sensitivity analysis for 25% and 75%.
[Note 2]: not applied to imports of energy sources from Canada, which are tariffed at a lower rate of 10%
We have not included the US–UK Economic Prosperity Deal, which reduces some tariffs between the US and the UK, in this analysis.
Contact
Email: economic.statistics@gov.scot