Nature abhors a vacuum, or so they, or potentially Aristotle, once said. During weeks like this, it feels more accurate to say it’s the news which is doing the abhorring.
Speculation has been, understandably, rampant as to the nature, variety, and impact of the tariffs the US President Donald Trump is expected to introduce on Wednesday, and just how they might affect everything from Chancellor Rachel Reeves’ fiscal headroom and the price of your supermarket shopping, to Tesla stocks and fears of a global recession.
Trump has already imposed 25 per cent tariffs on steel and aluminium imports, with further import taxes on cars and parts arriving in the US set to come in from April 2, in a blow to the UK’s automotive industry and its £7.6bn worth of exports to the US last year.
The so-called ‘Liberation Day’ package of announcements – set to be unveiled in a Rose Garden event at 9pm UK time – is expected to include reciprocal tariffs on countries levying duties on US goods, dashing hopes of the UK’s ‘special relationship’ sparing us.
The Washington Post reported White House aides have drawn up plans for 20 per cent tariffs on most imported goods arriving in the States – but suggested no final decision had yet been taken, leaving question marks over specific sectors or goods facing different rates.
Ultimately, we don’t know – with any ironclad certainty – exactly what Trump might do.
We don’t know exactly when fresh tariffs on the UK or the wider world will take effect, although there will likely be at least some delay between announcing and implementing.
We also don’t know for sure what other countries will do in response – from grinning and bearing it to retaliating with their own tariffs, or negotiating with Trump, like Canada and Mexico – and how Trump will then respond to that in return… and on and on it could go.
Amid the global vacuum of information, stock markets and investors are getting jittery, with the FTSE 100 down 1.3 per cent on Monday. Economists and experts are issuing warnings, including of a hit to consumers from “the burden of higher tariffs” and a “drag on global activity”, as per the Organisation for Economic Co-operation and Development (OECD).
Far-reaching consequences, no matter what
Myron Jobson, from Interactive Investor, stressed that even if the UK “manages to escape direct levies”, the tariffs “could have far-reaching consequences” for Brits, including impacts on mortgages, corporate investment and jobs, pensions and economic growth.
Business lobby groups such as the Federation of Small Businesses (FSB) have warned of the “huge headache for small firms” with “extra costs” causing a “huge ripple effect”.
Policy chairwoman Tina McKenzie urged the government to “consider state assistance” to SMEs as they “navigate the turmoil and help the firms bounce back as going concerns”.
And pollsters at More in Common found most Brits – 59 per cent – when asked said they were very or quite worried about tariffs. Just 11 per cent said they were not worried at all.
No exemption for the UK
So far, so cheery. Ministers – up to and including Prime Minister Sir Keir Starmer – have accepted hopes of an exemption ahead of Wednesday have faded, with Chancellor Rachel Reeves warning cabinet there will be an economic “impact”, but ongoing deal talks continue.
Marco Forgione, director-general of the Chartered Institute of Export & International Trade (CIEIT) told me yesterday that he believes the US administration hopes to see a “clear sense of impact from their tariffs”, as Trump focuses on “his America First agenda”.
But he insisted there was a “clear opportunity very soon afterwards we could seal an agreement” and an “appetite in Washington for a trade agreement to be reached”.
Another sliver of silver lining emerged on Tuesday morning when Professor David Miles, from the OBR, suggested to the Treasury committee that a “very limited” trade war, which the UK was not involved in, could perhaps be “very, very mildly positive” for the economy.
Ultimately, Starmer’s approach – maintaining a cordial relationship with the President, pursuing an economic deal, and avoiding “knee-jerk” reaction – has been shaped by the political and economic – not to mention geopolitical – complexities of the situation. There’s little he, or we, can now do, but hold our breath.
By City AM
