How Trump’s tariffs could cost consumers in the US and UK – even if he spares Britain

Published

3 months ago

March 4, 2025

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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

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.

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.

Business

Phoenix Group plots rebranding under historic Standard Life name

Published

4 hours ago

May 22, 2025

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Phoenix Group plots rebranding under historic Standard Life name

Phoenix Group, the FTSE-100 pensions provider, is plotting to rebrand itself using the historic Standard Life name it acquired four years ago.

Sky News has learnt that Phoenix, which has a market value of over £6.2bn, is drawing up plans to drop the current name of its listed holding company in favour of that of Standard Life, which traces its roots back to the 1820s.

City sources said an announcement was likely about the name-change in the coming months, although they insisted that a final decision had yet to be taken.

If it does go ahead, it would see the Standard Life name returning to the London Stock Exchange for the first time since Standard Life Aberdeen made the ill-advised decision to change its name to the frequently derided abrdn in 2021.

Standard Life is one of the City’s most venerable brands, and was structured as a mutual for much of its existence.

Responding to an enquiry from Sky News, a Phoenix Group spokesman said: “Our brand strategy must support our business strategy and this is kept under review.

“Standard Life is a strong brand with 200 years of history and the brand we are using to grow our business across three markets.

“You may have seen at our recent AGM we changed our articles of association to allow us to rebrand with board approval, rather than shareholder approval.

“This board approval hasn’t happened.”

He declined to comment on the company’s future intentions.

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Pressure builds on Reeves as borrowing rises ahead of spending review

Published

6 hours ago

May 22, 2025

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Pressure builds on Reeves as borrowing rises ahead of spending review

The Chancellor borrowed more than expected at the start of the new tax year, piling more pressure on the public finances ahead of next month’s spending review.

Data from the Office for National Statistics (ONS) showed estimated net borrowing of £20.2bn in April – higher than the £17.9bn forecast by economists and the fourth highest April total on record.

That was despite a £1.7bn projected boost from employer national insurance contributions – hiked in October’s budget to help get the public finances in order and which kicked-in on 6 April.

The main reasons for the rise in borrowing included increases in public sector pay, along with higher benefits and state pensions, the ONS said.

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The data will do nothing to ease nerves over the state of the nation’s coffers amid renewed concerns Rachel Reeves may be forced to act again, in the autumn budget, to meet her own “non-negotiable” fiscal rules.

They say she must balance day-to-day spending with revenues by 2029-30, while improving public services and targeting accelerated economic growth.

The Chancellor was forced to restore a £10bn buffer at the spring statement in March, led by planned welfare curbs, after the economy flatlined.

A further restoration of headroom may be on the cards in October, given that stronger growth in the first quarter of the year is forecast to prove elusive across the rest of 2025.

The run-up to next month’s spending review – which sets budgets for government departments – has been dominated by a political row over one of her first actions in the role, which saw universal winter fuel payments stopped.

Prime Minister Sir Keir Starmer confirmed on Wednesday that a U-turn, of sorts, is on the cards.

The prospect of a higher bill ahead will do nothing to ease the cost of servicing government debt, with bond market investors continuing to demand a higher premium to hold UK gilts.

Their concerns include not only the forecasts for slowing growth but also persistent inflation.

One good bit of news for Ms Reeves was a downwards revision by the ONS to its government borrowing figure for the last financial year.

The total dropped by almost £4bn to £148.3bn.

The shift was explained by higher tax receipts but the sum still remained about £11bn above the updated forecast by the Office for Budget Responsibility.

Darren Jones, chief secretary to the Treasury, said of the ONS figures: “After years of economic instability crippling the public purse, we have taken the decisions to stabilise our public finances, which has helped deliver four interest rate cuts since August, cutting the cost of borrowing for businesses and working people.

“We’re fixing the NHS, with three million more appointments to bring waiting lists down, rebuilding Britain with our landmark planning reforms and strengthening our borders, delivering on the priorities of the country through our plan for change.”

There is a growing school of thought that Ms Reeves will need to raise taxes in October if she is to meet her commitments, including her fiscal rules.

Lindsay James, investor strategist at wealth management firm Quilter, said: “The decision to hold off on tax rises in the spring budget increasingly looks like a temporary reprieve.

“As borrowing continues to outstrip forecasts and debt interest costs remain elevated, pressure is building on the chancellor to make tougher choices.”

Business

Bitcoin hits new high as investor appeal widens

Published

12 hours ago

May 22, 2025

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Bitcoin hits new high as investor appeal widens

Bitcoin has surged to a new all-time high – breaking through $111,000 for the first time.

It means every single person who has bought it since 2009 (and held onto it) will be sitting on a profit.

The surge follows a pretty dramatic 2025 for Bitcoin (BTC), with Donald Trump’s presidency making this digital asset even more volatile than usual.

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BTC had first managed to hit $109,000 on 20 January – the day Mr Trump was inaugurated – with investors hopeful that he would introduce a slew of pro-crypto policies.

Despite the president coming good on some of those promises, the world’s biggest cryptocurrency soon fell, amid accusations these policies didn’t go far enough.

The White House has confirmed the US will treat Bitcoin seized from criminals as an investment, but there was disappointment when it was confirmed the government would not be buying additional coins for its “strategic reserve” using taxpayers’ money.

Bitcoin also took a battering in the immediate aftermath of Mr Trump’s controversial “Liberation Day” tariffs – slumping to lows of $75,000 in April as investors dumped riskier assets.

There are several factors behind this recent comeback, with laws designed to regulate the crypto sector now advancing through the US Senate for the first time.

Interest in Bitcoin is also growing among hedge funds and financial institutions, while some companies are now in a race to buy as much of this cryptocurrency as possible.

One company called Strategy now has a war chest of 576,230 BTC worth $63bn – resulting in handsome profits of more than $23bn.

Part of BTC’s appeal lies in how it has a limited supply of 21 million coins, whereas the amount of traditional currencies in circulation often increases over time.

The latest milestone will likely contribute to a euphoric atmosphere when the president hosts a controversial dinner tomorrow for 220 of the biggest investors in $TRUMP, his very own cryptocurrency.

It also coincides with Bitcoin 2025 – the biggest crypto conference in the world – which is due to begin in Las Vegas on Tuesday – and growing financial market concerns about the size of the US government’s ballooning debt pile.

Nigel Green, chief executive of global financial advisory firm deVere Group, expects Bitcoin to set new milestones in the coming months.

“$150,000 no longer looks ambitious – it looks cautious,” he wrote in a note.

“Several forces have aligned to propel the market. A cooler-than-expected US inflation print, an easing in trade tensions between Washington and Beijing, and the Moody’s downgrade of US sovereign debt have all steered investors toward alternatives to traditional fiat-based stores of value.

“Bitcoin, often likened to digital gold, is soaking up that demand.

“In a world where sovereign credibility is fraying, investors are shifting decisively into assets that can’t be diluted or manipulated. Bitcoin has become not just a speculative play, but a strategic hedge.”