From midnight on Monday, Donald Trump’s tariffs on Mexico, Canada, and China came into effect. But what are they and what do they mean for the UK?

The second-time president claims the tariffs – taxes on goods imported into the US – will help reduce illegal migration and the smuggling of the synthetic opioid fentanyl to the US.

In a White House speech on Monday, Mr Trump confirmed 25% tariffs on goods from Mexico and Canada and the doubling of tariffs on Chinese imports – from 10% to 20%. Canadian energy will be levied at 10%, he added.

China responded immediately, with 15% taxes on food and agricultural products it sends to the US – worth around $21bn (£16.5bn).

Canadian Prime Minister Justin Trudeau also retaliated with extra tariffs worth $100bn (£78.7bn) over the next 21 days. Mexico has not yet announced any countermeasures.

Both Mexican President Claudia Sheinbaum and Mr Trudeau have promised extra troops at their US borders to combat illegal migration, in a bid to stop an all-out trade war with Mr Trump.

But he appears determined to go even further, targeting other countries, including those in the European Union, which he claims was created to “screw” the US.

Will Trump target UK with tariffs?

No new US tariffs have been announced on the UK.

And Prime Minister Sir Keir Starmer’s successful White House visit raised hopes Britain could avoid Mr Trump’s recent wave of them.

“I think there’s a very good chance that in the case of these two great, friendly countries, I think we could very well end up with a real trade deal where the tariffs wouldn’t be necessary. We’ll see,” the president told reporters afterwards.

Mr Trump is largely concerned with trade deficits – when you import more goods from another country than you send there in return.

The US does not have a trade deficit with Britain – so UK ministers have previously suggested this could be good news for avoiding new levies.

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But even if no tariffs are put on UK exports, consumers will still be impacted by the wider trade war.

Mr Trump’s Monday announcement sparked an immediate downturn in US and European stocks, with share prices for car manufacturers, including General Motors, which produces a lot of its trucks in Mexico, falling in particular.

Economists believe that tariffs will raise costs in the US, sparking a wave of inflation that will keep interest rates higher for longer. The US central bank, the Federal Reserve, is mandated to act to bring inflation down.

More expensive borrowing and costlier goods and services could bring about an economic downturn in the US, the world’s largest economy – and global movements could hit the UK.

Forecasts from the National Institute of Economic and Social Research (NIESR) predict lower UK economic growth due to higher global interest rates.

It estimates UK GDP (a measure of everything produced in the economy) could be between 2.5% and 3% lower over five years and 0.7% lower this year.

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Some economists argue, though, that the UK might not be hurt too badly – even if Mr Trump imposes tariffs on British goods.

The UK doesn’t send a lot of goods to the US, exporting its banking and consulting services to them instead, which do not tend to be subject to tariffs.

However, the Centre for Inclusive Trade Policy thinktank said a 20% across-the-board tariff, impacting the UK, could lead to a £22bn reduction in exports in the UK’s US exports, with the hardest-hit sectors including fishing and mining.

How will it impact US consumers?

Although the Trump administration said the 10% Canadian energy tariff will boost domestic energy production, there are likely to be wide-ranging negative consequences for the US consumer.

Economists argue supply chains will be disrupted and businesses will suffer increased costs – leading to an overall rise in prices.

Both Mexico and Canada rely heavily on their imports and exports, which make up around 70% of their Gross Domestic Products (GDPs), putting them at even greater risk from the new tariffs.

China only relies on trade for 37% of its economy, having made a concerted effort to ramp up domestic production, making it relatively less vulnerable.

Avocados – and other fruit and veg

The US imports between half and 60% of its fresh produce from Mexico – and 80% of its avocados, according to figures from the US Department of Agriculture.

Canada also supplies a lot of the US’s fruit and vegetables, which are mainly grown in greenhouses on the other side of the US border.

This means new tariffs will quickly be passed on to consumers in the form of higher prices.

The US still grows a considerable amount of its own produce, however, so the changes could boost domestic production.

But economists warn an overreliance on domestic goods will see those suppliers increase their prices too.

Petrol and oil prices

Oil and gas prices are likely to be impacted – as Canada provides around 60% of US crude oil imports and Mexico roughly 10%.

According to the US Energy Information Administration, the US received around 4.6 million barrels of oil a day from Canada last year – and 563,000 from Mexico.

Most US oil refineries are designed specifically to process Canadian products, which would make changing supply sources complex and costly.

Oil tariffs could see an increase in fuel prices of up to 50 cents (40p) a gallon, economists have predicted.

Cars and vehicle parts

The US car industry is a delicate mix of foreign and domestic manufacturers.

The supply chain is so complex that car parts and half-finished vehicles can sometimes cross the US-Mexico border several times before they are ready for the showroom.

If this continues, the parts will be taxed every time they move countries, which will lead to an even bigger increase in prices.

As a result, Gustavo Flores-Macias, public policy professor at Cornell University, says “the automobile sector, in particular, is likely to see considerable negative consequences”.

To mitigate this, General Motors has said it will try to rush through Mexican and Canadian exports – while brainstorming how to relocate manufacturing to the US.

Mr Trump said of this dilemma on Monday: “They’re going to have a tariff. So what they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs.”

Electronic goods

When Mr Trump imposed a 50% tariff on imported washing machines during his first term in 2018, prices suffered for years afterwards.

China produces a lot of the world’s consumer electronics – and smartphones and computers specifically – so tariffs are likely to have a similar effect on those devices.

The Biden administration tried to legislate to promote domestic production of semiconductors (microchips needed for all smart devices) – but for now, the US is still heavily reliant on China for its personal electronics.

This will mean an increase in prices for electronics consumers globally – unless tech companies can relocate their operations away from Beijing.

Boost for the steel industry

The sector that could actually benefit from the Trump tariffs is the steel and aluminium industry.

It has long been lobbying the US government to impose levies on foreign suppliers – claiming they are dominating the market and leaving domestic factories without enough business and at risk of closure.

Steel imports increasing in price could therefore promote domestic production – and possibly save some of the plants.

But when Mr Trump increased steel tariffs during his first term, prices also increased – which business leaders said forced them to pass on costs and left them struggling to complete construction projects on budget.

Lenders to one of Britain’s biggest networks of builders’ merchants are angling to take control of the company amid talks with its private equity backer over new funding requirements.

Sky News has learnt that Ares Management Corporation and Farallon Capital Europe, two major investment firms, could move to take ownership of Independent Builders Merchant Group (IBMG) in the coming weeks.

City sources said on Tuesday that a deal for Ares and Farallon to take over IBMG was likely to be implemented through a restructuring of the company’s debt, rather than any form of insolvency event.

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Interpath Advisory is working with IBMG on the process, according to the sources.

IBMG was founded with financial backing from Cairngorm Capital, a private equity firm, in 2018, and has grown since then through more than 20 acquisitions.

According to Cairngorm’s website – where IBMG is listed as a ‘realised investment’, which a spokesperson for the firm said was “in error” – IBMG now has more than 170 branches across the south of England.

It employs more than 2,000 people and recorded revenues of approximately £650m in its latest financial year.

IBMG operates through several divisions, including plumbing and heating, roofing and timber processing and distribution.

The company announced in April 2024 that it had secured new capital from Ares and Farallon but said at the time that this would be with “the continued support of Cairngorm Capital”.

Cairngorm Capital said: “Interpath has been appointed by IBMG’s shareholders to work on appropriate cost reduction initiatives, necessitated by the difficult cost environment that IBMG is operating in.

“Cairngorm Capital remains a majority shareholder although it has realised some of its investment.”

Ares, Farallon and Interpath declined to comment.

Around 1.3 million people on low wages are to secure guaranteed sick pay for the first time in a bid to boost health and living standards, the government has announced.

Those earning less than £123 a week on average will be entitled to a sick pay equivalent of 80% of their weekly salary or the new rate of statutory sick pay (SSP) – due to rise to £118.75 per week in April.

Employers will have to pay whatever the lowest sum is under a compromise achieved following discussions with business leaders – already reeling from a looming hike to minimum wage and employer national insurance contributions announced in October’s budget.

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The new sick pay policy is expected to take effect next year but, crucially, it will apply from the first day of sickness rather than after the third consecutive day.

The government argues that the measure will keep more people off benefits and leave some up to £100 better off per week because they will remain in employment.

Work and Pensions Secretary Liz Kendall said: “For too long, sick workers have had to decide between staying at home and losing a day’s pay, or soldiering on at their own risk just to make ends meet.

“No one should ever have to choose between their health and earning a living, which is why we are making this landmark change.

“The new rate is good for workers and fair on businesses as part of our plan to boost rights and make work pay, while delivering our plan for change.”

Unions had argued for an even higher figure.

The British Chambers of Commerce welcomed the outcome of the talks but said its members were still set to face further additional costs arising from the policy shift – on top of the budget measures due to take effect this April.

Jane Gratton, its deputy director of public policy, said: “Employers often struggle to find shift cover at short notice, leading to disruption for customers.

“The government’s impact assessment did not produce compelling evidence on the day-one rights issue, so there may yet be unforeseen consequences.”

The announcement was made as MPs debate the wider employment rights Bill amid reports the government could drop its commitment to a ‘right to switch off’ outside of working hours.

The Sunday Times also reported at the weekend that a series of amendments was likely to be tabled by ministers as part of government efforts to keep business sweet following a brutal backlash to the budget.

Business groups have argued that the £25bn annual hit from the employment tax measures will result in job cuts, poor pay awards and weaker investment – hitting the government’s growth agenda.

Rachel Suff, wellbeing adviser at the HR body CIPD, said of the additional sick pay plans: “Phasing in elements of the Employment Rights Bill and ensuring sufficient support and guidance for employers will be vital to making sure these measures work for employers and employees.”