The potential impact of US trade tariffs on global stock markets has dominated the news recently. So far, none are specifically aimed at the UK but that doesn’t make us immune to the effects.

Analysts have been scrambling to make sense of how Trump’s increasingly complex list of trade tariffs could boil over into British markets. UK companies with US supply chains could be hit with higher costs, affecting profitability. Moreover, tariffs can lead to uncertainty, resulting in investor sell-offs and increased market volatility.

The National Institute of Economic and Social Research (NIESR) estimates that US tariffs on Mexico and Canada could reduce UK GDP growth by 0.1% in 2025.

The implementation of a blanket 10% tariff on Chinese imports has also raised concerns. Some fear a surplus of Chinese exports like steel could be dumped on the UK market, dragging down domestic sales.

UK exports

The value of UK exports to the US is around £60bn a year based on the most recent data. If the US imposes tariffs on UK goods, companies that rely on American markets could face declining demand. 

The largest exports are pharmaceuticals, at £8.8bn, cars at £6.4bn and power generation machinery at £5.2bn. If the higher cost of these products is passed on to consumers, it may eventually lead to a drop in demand, hurting the UK economy.

Such trade tensions can also lead to market uncertainty, causing investors to flee riskier assets like stocks in favour of safer options like bonds or gold. 

However, not all stocks are at risk of losses.

An opportunity for recovery

Among the chaos, a decidedly British stock has emerged as a potential beneficiary. Oil and gas giant BP (LSE: BP) surged recently when Elliott Investment Management took an interest in the company’s direction. Earlier this week, the activist investor acquired a substantial stake in the company, leading to a 7% price surge. 

The fossil fuel industry is already in good stead to benefit from Trump’s policy changes and pressure from Elliott could extend this potential. 

But there’s still a lot of work to do.

In BP’s FY24 results published today (11 February), fourth-quarter profit fell 61% to $1.17bn, the lowest in four years. The weak performance has put further pressure on CEO Murray Auchincloss, with Elliott’s involvement expected to bring about board changes.

The firm will likely advocate for BP to refocus on core oil and gas operations, possibly scaling back its investments in renewable energy sectors. With profits in decline, there’s been a growing pushback against plans to transition to net zero carbon emissions by 2050.

While this strategy could enhance short-term profitability it raises ethical questions about BP’s long-term sustainability commitments. Shareholders in support of energy transition may choose to divest in the stock, reversing recent price gains.

After suffering extended losses in 2024, the stock has recovered 26% since Trump won the US election. There are still a number of risks it faces, such as supply chain issues and oil price volatility.

Yet with Elliott on board, I expect further growth in 2025, making it a stock worth considering.