With his tariffs announcement yesterday, Donald Trump got to do one of his favourite things: making the entire world hang on his every word.
Nervous government officials across the planet will have tuned in, no matter their time zone, to learn how battered their economy is likely to be.
And it wasn’t just politicians worried about the potential impact of the US President’s announcement – everyone from business leaders to regular shoppers were on the edge of their seat.
They got an answer. A baseline tariff of 10% will be applied to every country in the world, with certain nations and bodies getting an extra amount on top according to how imbalanced the US thinks their trade relationship is.
The UK government was relieved to get away with the minimum of 10% – particularly as the EU was hit with tariffs of 20% – but that will still have a massive effect.
On top of that, a 25% tariff on the car industry specifically also kicked in at 5am UK time.
Here’s how you might end up being hit.
How will the tariffs affect the UK?
First things first: a tariff is a tax on imports. In this case, the tariffs announced last night will be paid to the US government by companies in the US who are importing items from anywhere around the world.
So why would this have any effect on us?
Quite simply, the US is the UK’s biggest trading partner. It’s the destination for a massive 21.2% of all UK exports.
But now, the buyers of those exports will have to think twice about doing so again. At the drop of a hat, it’s become massively more expensive.
This will wallop many British businesses which have, over the course of decades, become used to relying on the US as a friendly partner.
What does this mean for prices?
British firms hurt by the tariffs could end up pushing up their prices to make up for the additional challenges.
There’s also the risk that such a monumental reshaping of global trade could hit the value of the pound, which will increase the cost of imports before you even factor in tariffs.
A bigger impact would come if the UK government decides to impose its own tariffs on US products coming over here, as a form of retaliation.
Keir Starmer, Chancellor Rachel Reeves and Business Secretary Jonathan Reynolds have all said they really want to make a trade deal instead – but have emphasised that nothing is off the table.
At the other end of the spectrum, there’s a chance that countries like China send cheap products that would have otherwise gone to the US over to the UK instead, as a means of avoiding the tariffs.
This would mean prices go down for UK customers, but would pose different issues for British businesses due to increased competition.
Will the tariffs affect the job market?
Yes, the tariffs are very likely to affect the UK job market.
Ahead of yesterday, the only anticipated tariffs we knew about in any detail were the ones set at 25% on the car industry.
This industry is a great example of how reliant much of the UK economy is on trade with the US. The total value of our car exports to the US last year was £9 billion.
According to the IPPR think tank, the new 25% tariffs could cost 25,000 jobs in the UK’s automotive sector – with employees at Jaguar Land Rover and the Mini factory at Cowley near Oxford most at risk.
Now we know the broader level of tariffs, the extent of potential job losses elsewhere may become clearer.
Among the other British industries that are heavily reliant on exporting to the US are pharmaceuticals, scientific instruments and aircraft.
What about my mortgage?
There has been some good news for mortgage holders in recent months, with the Bank of England making a series of cuts to the base rate that dictates how much many people pay each month.
Currently, the rate is sitting at 4.5% and economists think there will be more cuts before the end of the year.
But the predicted trade pandemonium resulting from the tariff announcement could put that at risk.
The Bank of England has previously said such a move could mean it avoids cutting the rate in the future, with Governor Andrew Bailey saying they would be ‘looking very closely’ at how global trade is disrupted.
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