How Trump’s tariffs could cost consumers in the US and UK – even if he spares Britain
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.
Ed Conway analysis:
How UK could avoid Trump’s trade war by accident
Please use Chrome browser for a more accessible video player
How Trump’s tariffs will affect Britain
Why tariffs could cost you – even if Trump spares UK
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.
Read more:
Trump pauses military aid to Ukraine
Analysis: Fine line between negotiations and blackmail
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?
The flags of Mexico, the United States and Canada. Pic: Reuters
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
Avocados from Mexico at a store in the US. Pic: Reuters
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
General Motors plant in Ramos Arizpe, Mexico. Pic: Reuters
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.
Donald Trump has said he will be “involved” in the decision on whether Netflix should be allowed to buy Warner Bros, as the $72bn (£54bn) deal attracts a media industry backlash.
The US president acknowledged in remarks to reporters there “could be a problem”, acknowledging concerns over the streaming giant’s market dominance.
Crucially, he did not say where he stood on the issue.
Money latest: The cheapest days to travel by plane
It was revealed on Friday that Netflix, already the world’s biggest streaming service by market share, had agreed to buy Warner Bros Discovery’s TV, film studios and HBO Max streaming division.
The deal aims to complete late next year after the Discovery element of the business, mainly legacy TV channels showing cartoons, news and sport, has been spun off.
But the deal has attracted cross-party criticism on competition grounds, and there is also opposition in Hollywood.
Please use Chrome browser for a more accessible video player
Netflix agrees $72bn takeover of Warner Bros
The Writers Guild of America said: “The world’s largest streaming company swallowing one of its biggest competitors is what antitrust laws were designed to prevent.
“The outcome would eliminate jobs, push down wages, worsen conditions for all entertainment workers, raise prices for consumers, and reduce the volume and diversity of content for all viewers.”
File pic: Reuters
Republican Senator, Roger Marshall, said in a statement: “Netflix’s attempt to buy Warner Bros would be the largest media takeover in history – and it raises serious red flags for consumers, creators, movie theaters, and local businesses alike.
“One company should not have full vertical control of the content and the distribution pipeline that delivers it. And combining two of the largest streaming platforms is a textbook horizontal Antitrust problem.
“Prices, choice, and creative freedom are at stake. Regulators need to take a hard look at this deal, and realize how harmful it would be for consumers and Western society.”
Paramount Skydance and Comcast, the parent company of Sky News, were two other bidders in the auction process that preceded the announcement.
The Reuters news agency, citing information from sources, said their bids were rejected in favour of Netflix for different reasons.
Paramount’s was seen as having funding concerns, they said, while Comcast’s was deemed not to offer so many earlier benefits.
Paramount is run by David Ellison, the son of the Oracle tech billionaire Larry Ellison, who is a close ally of Mr Trump.
The president said of the Netflix deal’s path to regulatory clearance: “I’ll be involved in that decision”.
On the likely opposition to the deal. he added: “That’s going to be for some economists to tell. But it is a big market share. There’s no question it could be a problem.”
Business
Young people may lose benefits if they don’t engage with help from new £820m scheme, government warns
Young people could lose their right to universal credit if they refuse to engage with help from a new scheme without good reason, the government has warned.
Almost one million will gain from plans to get them off benefits and into the workforce, according to officials.
Latest updates from the Politics Hub
Pic: iStock
It comes as the number of young people not in employment, education or training (NEET) has risen by more than a quarter since the COVID pandemic, with around 940,000 16 to 24-year-olds considered as NEET as of September this year, said the Office for National Statistics.
That is an increase of 195,000 in the last two years, mainly driven by increasing sickness and disability rates.
The £820m package includes funding to create 350,000 new workplace opportunities, including training and work experience, which will be offered in industries including construction, hospitality and healthcare.
Around 900,000 people on universal credit will be given a “dedicated work support session”.
That will be followed by four weeks of “intensive support” to help them find work in one of up to six “pathways”, which are: work, work experience, apprenticeships, wider training, learning, or a workplace training programme with a guaranteed interview at the end.
However, Work and Pensions Secretary Pat McFadden has warned that young people could lose some of their benefits if they refuse to engage with the scheme without good reason.
“Doing nothing should not be an option,” he told Sky News’ Sunday Morning with Trevor Phillips.
“If someone just took that attitude, yes, they would then be subject to, you know, the obligations that are already part of the system.”
“What I want to see is young people in the habit of getting up in the morning, doing the right thing, going to work,” he added.
“That experience of that obligation, but also the sense of pride and purpose that comes with having a job.”
Some young people on benefits will be offered job opportunities in construction. Pic: iStock
Read more from Sky News:
Child poverty strategy unveiled – but not everyone’s happy
Universal credit claimants soar by over million in a year
The government says these pathways will be delivered in coordination with employers, while government-backed guaranteed jobs will be provided for up to 55,000 young people from spring 2026, but only in those areas with the highest need.
However, shadow work and pensions secretary Helen Whately, from the Conservatives, said the scheme is “an admission the government has no plan for growth, no plan to create real jobs, and no way of measuring whether any of this money delivers results”.
She told Sky News the proposals are a “classic Labour approach” for tackling youth unemployment.
Please use Chrome browser for a more accessible video player
Youth jobs plan ‘the wrong answer’
“What we’ve seen today announced by the government is funding the best part of £1bn on work placements, and government-created jobs for young people. That sounds all very well,” she told Sunday Morning with Trevor Phillips.
“But the fact is, and that’s the absurdity of it is, just two weeks ago, we had a budget from the chancellor, which is expected to destroy 200,000 jobs.
“So the problem we have here is a government whose policies are destroying jobs, destroying opportunities for young people, now saying they’re going to spend taxpayers’ money on creating work placements. It’s just simply the wrong answer.”
Ms Whately also said the government needs to tackle people who are unmotivated to work at all, and agreed with Mr McFadden on taking away the right to universal credit if they refuse opportunities to work.
But she said the “main reason” young people are out of work is because “they’re moving on to sickness benefits”.
Ms Whately also pointed to the government’s diminished attempt to slash benefits earlier in the year, where planned welfare cuts were significantly scaled down after opposition from their own MPs.
The funding will also expand youth hubs to help provide advice on writing CVs or seeking training, and also provide housing and mental health support.
Some £34m from the funding will be used to launch a new “Risk of NEET indicator tool”, aimed at identifying those young people who need support before they leave education and become unemployed.
Monitoring of attendance in further education will be bolstered, and automatic enrolment in further education will also be piloted for young people without a place.
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment3 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024