Trump’s tariffs: what it means for the UK
Food and Drink Technology
A Bell Publishing publication providing the food & drink manufacturing industry with the latest news and developments.
It was only a matter of time before President Donald Trump’s words would have an impact far beyond American borders.
“Tariff Man” has returned, signing executive orders to impose 25 per cent tariffs on Canada and Mexico, and a 10 per cent tariff on China, declaring a national emergency due to illegal migration and drugs.
What this means for economies, diplomacy, and geopolitics, will invite plenty of commentators to have their say. But it’s the economic experts I am interested in.
The macroeconomic impact of the measures could affect the global economy through higher prices, supply chain disruptions, and exchange rate shifts. Different countries will fare worse than others. Yet, China, one of the intended targets facing the highest tariffs, is only seeing a modest reduction of around 0.3 percentage points in annual growth over the first three years, according to simulations on financial outcomes.
If affected countries retaliate, matters start to get tricky. The tariffs will disrupt world trade, which could be harmful here in the UK. They could easily reignite inflation.
As editor-in-chief of TopMoneyCompare, Russell Gous, said in his assessment of President Trump’s latest round of tariffs, they may strengthen the US dollar, however it is putting pressure on other major currencies, including sterling.
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“If these trade tensions escalate, we could see further volatility in GBP exchange rates, particularly against the dollar and euro, as investors shift towards safer assets,” he observes.
For the UK, the possibility of being hit with tariffs remains a key concern. While Trump has suggested a deal could be ‘worked out’, uncertainty over potential trade barriers could weigh on the pound, particularly if investors fear an economic slowdown due to reduced access to the US market. A weaker sterling would drive up the cost of imports, fuelling inflation and complicating the Bank of England’s monetary policy decisions.
In the aftermath of Brexit, the UK has yet to work out whether to strengthen ties with the US, deepen integration with the EU, or pursue a more independent trade policy.
As it stands, pursuing policies that are in its best interest make the most sense. In the meantime, the UK’s leaders will have to show tremendous skill in navigating an increasingly fragmented global economy.