Connect with us

Published

on

Donald Trump flourished his list of tariffs like a gameshow host in the White House Rose Garden on Wednesday – but there were no winners from the president’s made-for-TV show of economic strength.

The price was wrong for everyone and there is jeopardy for all, the US included.

From Asian nations in the engine room of global consumer manufacturing, facing tariffs above 40%, to the UK, handed the base rate of 10% alongside a host of nations including a group of uninhabited Antarctic islands, the terms of trade have fundamentally changed.

Trump tariffs latest: US stock markets tumble

The question now is what impact the tariffs will have locally, regionally and globally; and what nations should do in response.

The penguins of the Heard and McDonald Islands may be able to move on with a shrug, but not so Britain, where months of diplomatic effort concentrated on the Trump regime has delivered only the knowledge that it could have been worse.

The impact is hard to assess definitively, not least because nothing quite like this has ever happened in the era of trade liberation.

Mr Trump has stuck a spoke in the wheel of the global consensus, that ever-freer trade is good for everyone.

Please use Chrome browser for a more accessible video player

Sky’s Gurpreet Narwan drills down into the numbers

The Office for Budget Responsibility has hazarded a guess that a trade war could wipe 1% off UK GDP, worth around £33bn. What is clear is that the impact will be diverse and multi-level.

The direct impact will be felt hardest by the largest goods exporters. Car manufacturers face a huge blow, with 25% tariffs on the luxury vehicles Britain still does well adding a cost to US consumers, who account for 18% of the sector’s exports, worth around £8bn.

The pharmaceutical industry has much to lose too, though exports worth almost £9bn in 2023 appeared to have a stay of execution thanks to a clause in Trump’s executive order.

For the manufacturing industry, the tariffs will be “devastating”, according to the trade body Make UK, with second-round effects almost as damaging as the 10% notionally paid by US consumers.

Read more:
World leaders react to Trump’s announcement
Do Trump’s ‘Liberation Day’ numbers add up?

The UK may have left the EU but British industry still does a huge amount of business feeding supply chains for European products now subject to a 20% levy.

Anyone toasting a “Brexit benefit” from the EU’s misfortune still fails to understand the interconnectedness of our commercial relations.

Add the general cooling of the global economy caused by the richest nation on Earth’s demand to be made wealthier still, and it is a grim outlook.

What is to be done?

All of which begs the second question, what to do?

The UK’s mantra has been to remain pragmatic and calm in response, while continuing to seek an “economic agreement” with the US that includes an easing of tariffs.

Business Secretary Jonathan Reynolds showed a little mettle in Parliament, and a slight hardening of the UK line, by announcing a consultation with businesses over potential retaliatory tariffs.

Please use Chrome browser for a more accessible video player

Trump tariffs ‘disappointing’, says business secretary

Some sectors would like to see a muscular response, with the steel industry anxious that, in the event of a global trade war, a neutral UK would become a target for the “dumping” of cheap steel from exporters priced out of the US and EU.

Sectoral specifics aside, the truth is that the UK has limited ammunition in a trade war with the US. We buy around £60bn of goods, with machinery, fuels and chemicals, alongside Harley Davidson motorbikes and bottles of Jack Daniel’s, but the bulk of our trade is in services, professional skills flowing west and big tech coming the other way.

The digital services tax, currently extracting around £800m a year from US tech companies, is one chip Britain has to play in negotiations.

Some might call that a small price to pay to support the car industry, while others would see capitulation to social media giants and their billionaire backers.

As a senior cabinet minister put it shortly before Mr Trump’s election: “As a small nation outside a major trading bloc, getting involved in a trade war does not make a lot of sense.”

It was sound logic then and now. Unless the host of Trump Tariffs changes his tune, damage limitation may be the only prize on offer.

Continue Reading

Business

Trump announces yet more tariffs and praises ‘significant step’ from Apple

Published

on

By

Trump announces yet more tariffs and praises 'significant step' from Apple

Donald Trump has announced 100% tariffs on computer chips and semiconductors made outside the US.

The move threatens to increase the cost of electronics made outside the US, which covers everything from TVs and video game consoles to kitchen appliances and cars.

The announcement came as Apple chief executive Tim Cook said his company would invest an extra $100bn (£74.9bn) in US manufacturing.

Soon, all smartwatch and iPhone glass around the world will be made in Kentucky, according to Mr Cook, speaking from the Oval Office.

“This is a significant step toward the ultimate goal of ensuring that iPhones sold in the United States of America are also made in America,” said Mr Trump.

“Today’s announcement is one of the largest commitments in what has become among the greatest investment booms in our nation’s history.”

Mr Cook also presented the president with a one-of-a-kind trophy made by Apple in the US.

Trump seen through the trophy given to him by Tim Cook. Pic: AP
Image:
Trump seen through the trophy given to him by Tim Cook. Pic: AP

Trump’s tariffs hit India hard

Mr Trump has previously criticised Mr Cook and Apple after the company attempted to avoid his tariffs by shifting iPhone production from China to India.

The president said he had a “little problem” with Apple and said he’d told Mr Cook: “I don’t want you building in India.”

India itself felt Mr Trump’s wrath on Wednesday, as he issued an executive order hitting the country with an additional 25% tariff for its continued purchasing of Russian oil.

Indian imports into the US will face a 50% tariff from 27 August as a result of the move, as the president seeks to increase the pressure on Russia to end the war in Ukraine.

Mr Trump told reporters at the White House he “could” also hit China with more tariffs.

Read more:
Trump could meet Putin as early as next week

Please use Chrome browser for a more accessible video player

‘Good chance’ Trump will meet Putin soon

Apple’s ‘olive branch’

Apple, meanwhile, plans to hire 20,000 people in the US to support its extra manufacturing in the country, which will total $600bn (around £449bn) worth of investment over four years.

The “vast majority” of those jobs will be focused on a new end-to-end US silicon production line, research and development, software development, and artificial intelligence, according to the company.

Apple’s investment in the US caused the company’s stock price to hike by nearly 6% in Wednesday’s midday trading.

The rise may reflect relief by investors that Mr Cook “is extending an olive branch” to Mr Trump, said Nancy Tengler, chief executive of money manager Laffer Tengler Investments, which owns Apple stock.

Continue Reading

Business

Primark-owner ABF gets Hovis deal oven-ready

Published

on

By

Primark-owner ABF gets Hovis deal oven-ready

The London-listed parent of Primark was on Wednesday applying the finishing touches to a landmark transaction that will unite the Hovis and Kingsmill bread brands under common ownership.

Sky News understands that a deal for Associated British Foods (ABF) to acquire Hovis from private equity firm Endless is likely to be announced by the end of the week.

The timetable remains subject to delay, banking sources cautioned on Wednesday.

The deal, which will see ABF paying about £75m to buy 135 year-old Hovis, is likely to trigger a lengthy review by competition regulators given that it will bring together the second- and third-largest suppliers of packaged bread to Britain’s major supermarkets.

ABF owns Kingsmill’s immediate parent, Allied Bakeries, which has struggled in recent years amid persistent price inflation, changing consumer preferences and competition from larger rival Warburtons as well as new entrants to the market.

Confirmation of the tie-up will come three months after Sky News revealed that ABF and Endless – Hovis’s owner since 2020 – were in discussions.

Industry sources have estimated that a combined group could benefit from up to £50m of annual cost savings from a merger.

More from Money

Allied Bakeries was founded in 1935 by Willard Garfield Weston, part of the family which continues to control ABF, while Hovis traces its history even further, having been created in 1890 when Herbert Grime scooped a £25 prize for coming up with the name Hovis, which was derived from the Latin ‘Hominis Vis’ – meaning ‘strength of man”.

The overall UK bakery market is estimated to be worth about £5bn in annual sales, with the equivalent of 11m loaves being sold each day.

Critical to the prospects of a merger of Allied Bakeries, which also owns the Sunblest and Allinson’s bread brands, and Hovis taking place will be the view of the Competition and Markets Authority (CMA) at a time when economic regulators are under intense pressure from the government to support growth.

Warburtons, the family-owned business which is the largest bakery group in Britain, is estimated to have a 34% share of the branded wrapped sliced bread sector, with Hovis on 24% and Allied on 17%.

A merger of Hovis and Kingsmill would give the combined group the largest share of that segment of the market, although one source said Warburtons’ overall turnover would remain higher because of the breadth of its product range.

Responding to Sky News’ report in May of the talks, ABF said: “Allied Bakeries continues to face a very challenging market.

“We are evaluating strategic options for Allied Bakeries against this backdrop and we remain committed to increasing long-term shareholder value.”

Prior to its ownership by Endless, Hovis was owned by Mr Kipling-maker Premier Foods and the Gores family.

At the time of the most recent takeover, High Wycombe-based Hovis employed about 2,700 people and operated eight bakery sites, as well as its own flour mill.

Hovis’s current chief executive, Jon Jenkins, is a former boss of Allied Milling and Baking.

ABF declined to comment, while neither Endless nor Hovis could be reached for comment.

Continue Reading

Business

Chancellor warned ‘substantial tax rises’ needed – as she faces ‘impossible trilemma’

Published

on

By

Chancellor warned 'substantial tax rises' needed - as she faces 'impossible trilemma'

Rachel Reeves will need to find more than £40bn of tax rises or spending cuts in the autumn budget to meet her fiscal rules, a leading research institute has warned.

The National Institute of Economic and Social Research (NIESR) said the government would miss its rule, which stipulates that day to day spending should be covered by tax receipts, by £41.2bn in the fiscal year 2029-30.

Politics Hub: Follow latest updates

In its latest UK economic outlook, NIESR said: “This shortfall significantly increases the pressure on the chancellor to introduce substantial tax rises in the upcoming autumn budget if she hopes to remain compliant with her fiscal rules.”

The deteriorating fiscal picture was blamed on poor economic growth, higher than expected borrowing and a reversal in welfare cuts that could have saved the government £6.25bn.

Together they have created an “impossible trilemma”, NIESR said, with the chancellor simultaneously bound to her fiscal rules, spending commitments, and manifesto pledges that oppose tax hikes.

Read more:
What is a wealth tax?

Please use Chrome browser for a more accessible video player

Could the rich be taxed to fill black hole?

Reeves told to consider replacing council tax

The institute urged the government to build a larger fiscal buffer through moderate but sustained tax rises.

“This will help allay bond market fears about fiscal sustainability, which may in turn reduce borrowing costs,” it said.

“It will also help to reduce policy uncertainty, which can hit both business and consumer confidence.”

It said that money could be raised by reforms to council tax bands or, in a more radical approach, by replacing the whole council tax system with a land value tax.

To reduce spending pressures, NIESR called for a greater focus on reducing economic inactivity, which could bring down welfare spending.

Please use Chrome browser for a more accessible video player

What’s the deal with wealth taxes?

Growth to remain sluggish

The report was released against the backdrop of poor growth, with the chancellor struggling to ignite the economy after two months of declining GDP.

The institute is forecasting modest economic growth of 1.3% in 2025 and 1.2% in 2026. That means Britain will rank mid-table among the G7 group of advanced economies.

‘Things are not looking good’

However, inflation is likely to remain persistent, with the consumer price index (CPI) likely to hit 3.5% in 2025 and around 3% by mid-2026. NIESR blamed sustained wage growth and higher government spending.

It said the Bank of England would cut interest rates twice this year and again at the beginning of next year, taking the rate from 4.25% to 3.5%.

Persistent inflation is also weighing on living standards: the poorest 10% of UK households saw their living standards fall by 1.3% in 2024-25 compared to the previous year, NIESR said. They are now 10% worse off than they were before the pandemic.

Professor Stephen Millard, deputy director for macroeconomics at NIESR, said the government faced tough choices ahead: “With growth at only 1.3% and inflation above target, things are not looking good for the chancellor, who will need to either raise taxes or reduce spending or both in the October budget.”

Continue Reading

Trending