The Opening Salvo: A Global Trade War?

President trump’s recent declaration of tariffs on goods from around the world, including a 10% levy on UK imports, has ignited concerns about a potential global trade war. While the UK faces a lower tariff rate compared to some nations,the implications for British consumers and the broader economy remain significant.

The immediate effect is uncertainty. How these tariffs will ultimately affect the UK is still unfolding.

Prices in the UK: Will Your wallet Feel the Pinch?

Currently, the UK has not announced any retaliatory tariffs, meaning prices on US imports remain stable. Though,should the government respond in kind,consumers could see price increases on goods sourced from the US. The burden of these tariffs, initially borne by importing companies, could be passed on to consumers, particularly in sectors with tight profit margins.

Alternatively, importers might seek products from countries unaffected by the tariffs, potentially mitigating inflation. A surplus of goods from these alternative sources could even lead to price decreases, especially if those countries also face US tariffs and reduce exports to the US.

Pensions and Investments: Navigating Market Volatility

Global stock market declines triggered by the tariff announcement could significantly impact personal finances.Even those who don’t directly invest in stocks or funds may see effects on their pension holdings, particularly those nearing retirement.

Many UK investors hold US shares, either directly or through funds, and have likely already experienced a decline in their US investments. Other stock markets, including the UK’s, have also seen declines.

Further market drops will reduce the value of investments, posing a risk for those needing to liquidate assets before markets recover. However, for those contributing to regular investment plans, lower market prices mean buying more units in a fund, potentially leading to greater returns when the market rebounds.

It may sound counterintuitive but staying invested throughout times of volatility is the best strategy. when markets hit rocky waters, jumping in and out should be avoided, otherwise you run the risk of missing out on unexpected opportunities that might arise from market corrections.
Tom Stevenson, investment director at Fidelity International

Mr. Stevenson emphasized the difficulty in predicting market behavior, advocating for a long-term investment approach to achieve desired outcomes.

Taking a long-term approach and remaining invested in spite of highs or lows is more likely to get you the outcome you want.
Tom Stevenson, investment director at Fidelity International

Mortgages: Interest Rate Uncertainty

The Bank of England, in its recent decision to hold interest rates at 4.5%, cited “a lot of economic uncertainty at the moment,” including the threat of tariffs. While previously anticipating four rate cuts this year (with one already implemented), an economic slowdown could prompt the Bank to consider faster rate cuts to stimulate the UK economy.

Money markets now suggest a rate cut in May is highly likely. Mortgage rates are expected to fall if markets anticipate further cuts in the coming years.

Jobs: Industries at Risk

The most significant threat posed by the tariffs is to employment, particularly in industries heavily reliant on exports to the US. As American consumers shift towards domestically produced goods, these industries could face significant challenges.

Carmakers are particularly vulnerable, facing a higher tariff of 25%. The IPPR thinktank estimates that over 25,000 direct jobs in car manufacturing could be at risk due to declining exports to the US,with employees at Jaguar Land rover and the Cowley Mini factory being the most vulnerable.

Companies facing redundancies must adhere to specific legal requirements. Employees typically need at least two years of service to qualify for statutory redundancy pay.

Energy bills: A Looming Increase?

Analysts at Aurora energy Research suggest that Trump’s tariffs could lead to higher energy bills for British households.

Tariffs mean the US produces more goods at home, demanding more energy, and leaving less oil and gas available to export to Europe.
Anise Ganbold, head of global energy markets research at Aurora

The US became the UK’s largest supplier of liquefied natural gas (LNG) in 2022, surpassing Qatar, and accounted for 17% of Britain’s gas imports last year, according to government figures. reduced exports could mean fewer LNG cargoes for the UK, leading to higher gas market prices and, consequently, increased household energy bills.

UK energy prices will be heavily affected by what Starmer decides to do in response to Trump’s tariffs. If the UK imposes retaliatory tariffs without an exception for energy, that will have a direct impact on UK energy prices as of the UK’s heavy reliance on US LNG.
Jacob Mandel, a researcher at Aurora