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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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.
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?
Image: 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
Image: 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
Image: 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.
A health and beauty retailer founded on a Lancashire market stall more than half a century ago is facing collapse amid a race to find a rescue deal.
Sky News has learnt that Bodycare, which employs about 1,500 people, could fall into administration as soon as next week unless a buyer is found.
City sources said that Interpath, the advisory firm which has been working with Bodycare and its owners for several months, was continuing to explore options for the business.
The company is owned by Baaj Capital, a family office run by Jas Singh.
Its other investments have included In The Style, which underwent a pre-pack administration earlier this year, and party products supplier Amscan International.
Baaj also attempted to take over The Original Factory Shop earlier this year before its offer was trumped by Modella Capital, another specialist retail investor.
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News of Bodycare’s travails comes just weeks after the retailer secured a £7m debt facility to buy it short-term breathing space.
The facility was secured against Bodycare’s retail inventory, according to a statement last month.
Bodycare was established by Graham and Margaret Blackledge in Skelmersdale in 1970, and sells branded products made by the likes of L’Oreal, Nivea and Elizabeth Arden.
The chain was profitable before the pandemic, but like many retailers lost millions of pounds in the financial years immediately after it hit.
Bodycare received financial support from the taxpayer in the form of a multimillion pound loan issued under one of the Treasury’s pandemic funding schemes.
The chain is run by retail veteran Tony Brown, who held senior roles at BHS and Beales, the now-defunct department store groups.
If Bodycare does fall into insolvency proceedings, it would be the latest high street chain to face collapse this year, amid intensifying complaints from the industry about tax increases announced in last autumn’s budget.
In recent weeks, River Island narrowly avoided administration after winning creditor approval for a restructuring involving store closures and job losses.
Later this week, the struggling discount giant Poundland will seek similar approval from the courts for a radical overhaul that will entail dozens of shop closures.
Bodycare could not be reached for comment on Tuesday, while Baaj has been contacted for comment and Interpath declined to comment.
President Trump says he is firing a governor of the US central bank, a move seen as intensifying his bid for control over the setting of interest rates.
He posted a letter on his Truth Social platform on Monday night declaring that Lisa Cook – the first black woman to be appointed a Federal Reserve governor – was to be removed from her post on alleged mortgage fraud grounds.
She has responded, insisting he has no authority over her job and vowed to continue in the role, threatening a legal battle that could potentially go all the way to the Supreme Court.
The president‘s threat is significant as he has consistently demanded that the central bank cut interest rates to help boost the US economy. Growth has sagged since he returned to office on the back of US trade war gloom and hiring has slowed sharply in more recent months.
Mr Trump has previously directed his ire over rates at Jay Powell, the chair of the Federal Reserve, blaming him for the economic jitters and has repeatedly called for him to be fired.
The Fed, as it is known, has long been considered an institution independent from politics and question marks over that independence has previously shaken financial markets.
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The dollar was hit overnight while US futures indicate a negative opening for stock markets.
Mr Powell’s term is due to end next spring and the president is expected to soon nominate his replacement.
Image: Fed chair Jay Powell is seen in discussion with board member Lisa Cook. Pic: AP
The Fed has 12 people with a right to vote on monetary policy, which includes the setting of interest rates and some regulatory powers.
Those 12 include the seven members of the Board of Governors, of which Ms Cook is one.
Replacing her would give Trump appointees a 4-3 majority on the board.
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July: Fed chair has ‘done a bad job’, says Trump
He has previously said he would only appoint Fed officials who support lower borrowing costs.
Ms Cook was appointed to the Fed’s board by then-president Joe Biden in 2022 and is the first black woman to serve as a governor.
Her nomination was opposed by most Senate Republicans at the time and was only approved, on a 50-50 vote, with the tie broken by then-vice president Kamala Harris.
It was alleged last week by a Trump appointed regulator that Ms Cook had claimed two primary residences in 2021 to get better mortgage terms.
Mortgage rates are often higher on second homes or those purchased to rent.
She responded to the president’s letter: “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” she said in an emailed statement.
“I will not resign.”
Legal experts said it was for the White House to argue its case.
But Lev Menand, a law professor at Columbia law school, said of the situation: “This is a procedurally invalid removal under the statute.
“This is not someone convicted of a crime. This is not someone who is not carrying out their duties.”
The Fed was yet to comment.
It has held off from interest rate cuts this year, largely over fears that the president’s trade war will result in a surge of inflation due to higher import duties being passed on in the world’s largest economy.
However, Mr Powell hinted last week that a cut could now be justified due to risks of rising unemployment.
The owners of New Look, the high street fashion retailer, have picked bankers to oversee a strategic review which is expected to see the company change hands next year.
Sky News has learnt that Rothschild has been appointed in recent days to advise New Look and its shareholders on a potential exit.
The investment bank’s appointment follows a number of unsolicited approaches for the business from unidentified suitors.
New Look, which trades from almost 340 stores and employs about 10,000 people across the UK, is the country’s second-largest womenswear retailer in the 18-to-44 year-old age group.
It has been owned by its current shareholders – Alcentra and Brait – since October 2020.
In April, Sky News reported that the investors were injecting £30m of fresh equity into the business to aid its digital transformation.
Last year, the chain reported sales of £769m, with an improvement in gross margins and a statutory loss before tax of £21.7m – down from £88m the previous year.
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Like most high street retailers, it endured a torrid Covid-19 and engaged in a formal financial restructuring through a company voluntary arrangement.
In the autumn of 2023, it completed a £100m refinancing deal with Blazehill Capital and Wells Fargo.
A spokesperson for New Look declined to comment specifically on the appointment of Rothschild, but said: “Management are focused on running the business and executing the strategy for long-term growth.
“The company is performing well, with strong momentum driven by a successful summer trading period and notable online market share gains.”
Roughly 40% of New Look’s sales are now generated through digital channels, while recent data from the market intelligence firm Kantar showed it had moved into second place in the online 18-44 category, overtaking Shein and ASOS.