Trump tariffs: How the UK finds itself in a strong position on US trade

Published

6 months ago

February 4, 2025

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What if Britain has, almost entirely by accident, navigated itself into about the best possible position it could be in, as Donald Trump embarks on a trade war with nearly all his economic partners?

I realise this might, at first, sound a little odd. After all, when the world is facing economically-destructive measures (blanket tariffs are invariably value-destructive, in the short run at least) it’s hard to see much in the way of victories. Moreover, when it comes to Donald Trump, no one, including his own cabinet and staff, can quite predict what will happen next. Consider the roller-coaster over tariffs in the past few days alone.

Even so, the fact remains that of all the countries and regions in the world, Britain seems much less likely than most to face the kind of peremptory tariffs the president is so keen on.

Trade war latest: Trump pauses Mexico tariffs for a month

To see why, it helps to remember that the one thing Mr Trump hates above all else is trade deficits – when you import more goods (and it seems to be goods he mostly cares about) from another country than you send there in return.

America has an enormous trade deficit with China and with Mexico too, not to mention a smaller but not insubstantial deficit with Canada. When the president talks about the reasons for his tariffs he sometimes mentions illegal fentanyl imports, but, even more often, he references the size of the trade deficits. He wants America to make more stuff domestically and suck in less stuff from overseas.

We could have a long conversation (and I suspect we probably will have a long conversation in the coming months) about the extent to which deficits are, per se, a bad thing. But in the short run let’s focus on the UK and its strengths in this game.

First, since the UK is no longer part of the European Union, it will not automatically face the same trade terms as its neighbours on the continent. If the US imposes tariffs on the EU, Britain will not necessarily face them.

Second, if there is one country in the world with even bigger trade deficits than the US, it’s Britain. This country has deindustrialised even quicker than America, with the upshot that unlike the EU or Canada or Mexico, Britain is one of the few countries in the world to import more goods from America than America imports from it.

Footnote: that last point actually depends on whose numbers you’re looking at. Look at America’s figures and it has a trade surplus with the UK. Look at Britain’s figures and America has a trade deficit with us. But either way, both are very small. The numbers are essentially balanced.

Third, in recent months, the new Labour government has begun to improve its relationship with China. Chancellor Rachel Reeves went on a financial diplomacy mission to Beijing last month. And unlike nearly every other industrialised country in the developed world, Britain has not imposed tariffs on imports of Chinese electric vehicles.

Many diplomats have raised their eyebrows about this, but in the event that America wanted to do a deal with Britain, this is precisely the kind of thing the government could quickly reverse: “Oh alright then – in return for this trade deal, we’re willing to impose those tariffs on China – the ones everyone else has already introduced.”

The funny thing about these three strengths is that, first off, up until recently many would have seen each of them – Brexit, our deindustrialisation and our cosying up to China – as weaknesses rather than strengths. They certainly weren’t part of any grand strategic plan.

Even so, the UK nonetheless finds itself in an unexpectedly propitious position when it comes to negotiating with the US. It has a better chance than most nations to act as a diplomatic bridge between America and Europe. Its chances of sealing that much-vaunted trade deal with the US have improved rather than deteriorated. Indeed, I’m told that leading members of the administration believe a trade deal with the UK could be sealed in a matter of months.

Whether that actually eventuates remains to be seen. After all, if there’s one thing you can’t predict when it comes to Donald Trump it’s, well, anything.

Business

Microsoft is now worth over $4 trn, becoming only second firm ever to pass milestone

Published

2 hours ago

July 31, 2025

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Microsoft has become only the second publicly traded company after Nvidia to surpass $4 trn (£3.03trn) in market valuation, after registering huge earnings.

On Thursday, shares rose on Wall Street with the S&P 500 and Nasdaq climbing to new record highs.

Stocks in Microsoft jumped after posting better-than-expected results, helped by its Azure cloud computing platform, which is a centrepiece of the company’s artificial intelligence (AI) efforts.

Shares in Facebook and Instagram’s parent company, Meta, also surged after beating sales and profit targets.

Technology giants Apple and Amazon will report their results after Wall Street’s close.

Microsoft first cracked the $1trn (£760bn) mark in April 2019, but its move to $3trn (£2.27trn) took longer than technology giants Nvidia and Apple.

Nvidia tripled its value in just about a year and clinched the $4trn milestone before any other company on 9 July. Apple was last valued at $3.12trn.

In comparison, the biggest UK company by market value is drug manufacturer AstraZeneca, worth $235.97bn (£178.55bn).

Companies ranked by market value (USD), according to tradingview.com

1. Nvidia (US) $4.43trn
2. Microsoft (US) $4trn
3. Apple (US) $3.12trn
4. Amazon (US) $2.47trn
5. Alphabet (US) $2.35trn
6. Meta (US) $1.95trn
7. Saudi Arabian Oil (Saudi Arabia) $1.56trn
8. Broadcom (US) $1.42trn
9. Berkshire Hathaway (US) $1.03trn
10. Tesla (US) $1.02trn
11. Taiwan Semiconductor Manufacturing (Taiwan) $1trn
29. Samsung Electronics (South Korea) $338.06bn
36. Alibaba (China) $284.62bn
52. AstraZeneca (UK) $235.97bn

While sweeping US tariffs had investors worried about tighter business spending, Microsoft’s strong earnings have shown that the company’s books are yet to take a hit.

Microsoft’s multibillion-dollar bet on OpenAI is proving to be a game changer, powering its Office Suite and Azure offerings with cutting-edge AI and fueling the stock to more than double its value since ChatGPT’s late-2022 debut.

On Wednesday, the firm announced Azure sales surpassed $75bn (£56bn) on an annual basis, while Azure revenue jumped 39% in the April-June quarter.

Overall revenue rose 18% to $76.4bn (£57.81bn) over the same period.

It is also forecasting a record $30bn (£22.7bn) in capital spending over the first quarter to meet soaring AI demand..

Business

Christmas food price shock looms, chancellor warned

Published

17 hours ago

July 31, 2025

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Christmas food price shock looms, chancellor warned

Food inflation will rise to 6% by the end of the year – posing a “significant challenge” to household budgets in the run-up to Christmas, industry leaders have predicted.

The British Retail Consortium is warning that the chancellor risks “fanning the flames of inflation” if she hikes taxes in the coming budget.

Despite intense price competition between supermarket chains, the BRC has sounded the alarm over the pace of grocery price hikes.

As of this month, food inflation has risen 4% year on year – its highest level since February 2024.

The BRC said this increase is linked to global factors, such as high demand and crop struggles.

Beef, chicken and tea prices are among those that have risen the most this year – but some of the blame is being laid squarely at the chancellor’s door too.

The BRC said it was inevitable that a £7bn burden, through changes to employers’ national insurance contributions and minimum pay rules after last October’s budget, had been partly passed on to customers in the form of higher prices.

It published the results of a survey of retail industry finance chiefs to illustrate its point – that nerves about what Ms Reeves’s second budget could bring were not helping companies invest in either new employment or prices.

Business was promised it would be spared additional pain after it was put on the hook for the bulk of the chancellor’s tax-raising measures last year.

However, speculation is now rife over who will feel the pain this autumn as she juggles a deterioration in the public finances.

A widening black hole is estimated at around £20bn.

The cost of servicing government debt has risen since the last budget, while U-turns on welfare reforms and winter fuel payment cuts have made her job even harder – making further tax-raising measures inevitable.

The survey of chief financial officers for the BRC showed the biggest current fear ahead was for the “tax and regulatory burden”.

Two-thirds of the CFOs predicted further price rises in the coming year, at a time when the headline rate inflation already remains stuck way above the Bank of England’s target of 2%.

It currently stands at 3.6%.

Helen Dickinson, chief executive of the BRC, said: “Retail was squarely in the firing line of the last budget, with the industry hit by £7bn in new costs and taxes.

“Retailers have done everything they can to shield their customers from higher costs, but given their slim margins and the rising cost of employing staff, price rises were inevitable.

“The consequences are now being felt by households as many struggle to cope with the rising cost of their weekly shop.

“It is up to the chancellor to decide whether to fan the flames of inflation, or to support the everyday economy by backing the high street and the local jobs they provide.”

She concluded: “Retail accounts for 5% of the economy yet currently pays 7.4% of business taxes and a whopping 21% of all business rates.

“It is vital the upcoming reforms offer a meaningful reduction in retailers’ rates bill, and ensures no store pays more as a result of the changes.”

The Treasury has been approached for comment.

Business

US Federal Reserve defies calls from Donald Trump to cut interest rate

Published

1 day ago

July 30, 2025

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US Federal Reserve defies calls from Donald Trump to cut interest rate

The Federal Reserve has defied calls from US President Donald Trump for a cut to the interest rate by leaving it unchanged.

The decision means it has an effective rate of 4.3%, where it has remained after the central bank, known as the Fed, reduced it three times last year.

“We’re keeping the rates high, and it’s hurting people from buying houses,” Mr Trump told reporters. “All because of the Fed.”

Money latest: Three major broadband firms hike prices

Mr Trump has repeatedly been asked whether he would fire Fed chair Jerome Powell if he failed to heed his demand to cut the rate.

In June, the US president labelled Mr Powell a “stupid person” after the Fed decided not to change rates. Then less than two weeks later, in a further attack, he said the Fed’s chair should “ashamed” and would “love” him to resign.

The US president has spent months verbally attacking Mr Powell.

There were clear tensions between the pair last Thursday as they toured the Federal Reserve in Washington DC, which is undergoing renovations.

When taking questions, Mr Trump said: “I’d love him to lower interest rates,” then laughed and slapped Powell’s arm.

The US president also challenged him, in front of reporters, about an alleged overspend on the renovations and produced paperwork to prove his point. Mr Powell shook his head as Trump made the claim.

When Mr Trump was asked what he would do as a real estate mogul if this happened to one of his projects, he said he’d fire his project manager – seemingly in reference to Mr Powell.

Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.

The Fed has expressed concern about the impact of Mr Trump’s signature economic policy of implementing new tariffs, taxes on imports to the US.

On Wednesday, the president said he was still negotiating with India on trade after announcing the US will impose a 25% tariff on goods imported from the country from Friday.

Mr Trump also signed an executive order on Wednesday implementing an additional 40% tariff on Brazil, bringing the total tariff amount to 50%, excluding certain products, including oil and precious metals.

The committee which sets rates voted 9 to 2 to keep the benchmark rate steady, the two dissenters were appointees of President Trump who believe monetary policy is too tight.

In a policy statement to explain their decision, the Federal Reserve said that “uncertainty about the economic outlook remains elevated” but growth “moderated in the first half of the year,” possibly bolstering the case to lower rates at a future meeting.

Nathan Thooft, chief investment officer at Manulife Investment Management, described the rate decision as a “kind of a nothing burger” and it was “widely expected”.

Tony Welch, chief investment officer at SignatureFD, agreed that it was “broadly as expected”. He added: “That explains why you’re not seeing a lot of movement in the market right now because there’s nothing that’s surprising.”