PRESIDENT Trump will today unleash the biggest shake-up in global trade since World War Two as he threatens to impose tariffs across the globe.
But what will it mean for us in Britain – and can we escape the pain.
Here we answer the key questions . . .
WHAT is happening today?
According to Donald Trump, it is “Liberation Day”.
To others, it is known — and feared — as “world tariff day”, with the President getting ready to ramp up his global trade war.
Only Trump knows exactly what he will announce when he speaks at around 9pm UK time.
Last night, he was said to be “perfecting his announcement” inside the White House.
But the expectation is that he will slap a blanket tariff of 20 per cent on all finished foreign goods entering the US, with no initial exemptions for allies such as the UK.
HOW does a tariff work?
In effect, it is a tax on foreign goods coming into a country.
It is paid by the company which imports goods and goes to that country’s government.
Most tariffs are set as a percentage of the value of the goods.
For example, a 20 per cent tariff would mean a charge of $10,000 on a $50,000 car.
Typically, it makes the price of that product more expensive as the tariff is passed straight on to consumers.
Tariffs have the specific purpose of giving home-grown companies an advantage over foreign producers trying to sell goods in a market.
WHY is Trump doing this?
The US President has long been a fan of the tariff — famously describing it as the “most beautiful word in the dictionary”.
He has raged for years about the unfairness of other countries slapping taxes on the import of US goods, with the EU a particular target of his rage after BMWs and Mercedes from Europe have flooded the American car market.
The EU is included in a “Dirty 15” list of countries which export more to the US than they import in return — which is known as a trade imbalance.
Trump also believes that introducing tariffs will encourage more companies to build factories in America to avoid tariffs, and that US consumers will be more likely to buy “made in America” products if they are cheaper as a result of being tariff-free.
Trump once called tariffs the ‘most beautiful word in the dictionary’[/caption]
WHAT will the immediate impact be for the UK?
At the very least, there will be huge uncertainty and companies are already having to pause their investments or shipments to the US while they wait for the full impact of Trump’s onslaught.
Trump has already indicated there will be 25 per cent tariffs on all imports of steel and cars, which would hit British manufacturers such as Aston Martin and Jaguar Land Rover.
There is also nervousness that Trump could look to punish the UK because of our policy of imposing VAT on the sale of most goods.
Trump hates VAT and has called it “unfair and discriminatory”.
A blanket tariff on UK exports would clobber everything from cheese to luxury clothing and whisky.
Pharmaceuticals and chemicals firms are particularly exposed.
HOW will Keir Starmer react?
He is trying to be calm and the Prime Minister has signalled he will not hit back with “knee-jerk” counter-tariffs.
His strategy has been to try to charm the President — most memorably by hand-delivering him an invitation from King Charles for a State visit.
Keir Starmer has signalled he will not hit back with ‘knee-jerk’ counter-tariffs[/caption]
But this has failed to win the UK any initial exemption from today’s announcement — with Trump wanting a big global moment.
Talks will continue in the coming weeks on agreeing a new UK/US economic partnership which could see some or all of the tariffs ultimately lifted.
In return for a deal, the UK is expected to make concessions to the President, including changes to the UK’s global tech tax, which mostly hits big US firms.
HOW dangerous is this moment for the UK?
Very.
Both Starmer and his Business Secretary Jonathan Reynolds say the UK is better placed than any other country to strike a deal with Trump.
Reynolds has insisted there are “advanced talks” and said that today is “not a deadline”.
The US imports £60.4billion of British goods, only fractionally more than the £57.9billion the UK imports from America.
So Trump has less reason to hammer the UK than the EU, for example.
However, Trump is highly unpredictable and, if no good deal can be reached, Starmer will find himself under intense pressure to impose retaliatory tariffs on US exports to the UK.
In other words, we would be in a trade war with our biggest economic partner.
With the economy fragile, experts believe a tariff war could hit UK growth by one per cent.
Products such as Jack Daniel’s could be much more expensive for British consumers[/caption]
At a stroke, it would wipe out all of the Chancellor’s £10billion headroom, which she created last week by cutting benefits and other spending.
WHAT does it mean for consumers?
One word: Pain.
Tariffs are a nightmare for business because they make the flow of goods around the world much more expensive.
As we found out from the hangover of the pandemic, any snarl in supply chains leads to prices soaring.
If the UK snaps back and imposes tariffs on US goods, it would make products such as Levi’s jeans, Jack Daniel’s and Harley-Davidsons much more expensive for British consumers.
There is the counter argument that goods could become cheaper as companies divert products originally destined for the US to the UK.
But, in the long-term, the big risk is that this so-called “diversionary trade” ends up flooding our market with cheap imports, ruining British homegrown companies who can not compete and costing thousands of jobs.
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