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There’s fear in some quarters of another Donald Trump presidency but will the economics be that bad?

Not a single vote has been counted but the policies of a possible second Trump presidency have already influenced financial markets.

The cost of US and UK borrowing – measured through 10-year revenue-raising instruments called bonds – has been upped as traders eyed the price-rising impact a Trump presidency could have on the world’s biggest economy.

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A signature policy of his – tariffs – could make things worse for US consumers, in turn hurting the world economy of which the UK is a part.

Precise detail on what tariffs Trump would apply on what goods and from where remains to be seen. He’s said all goods coming into the country could be slapped with a 10% tax.

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Goods from China are going to be particularly hit with an anticipated 60% levy.

Why tariffs?

The hope is that by making imports more expensive goods made in the US will be more competitive and comparatively cheaper. More people would buy those things and life would be better for US producers, the thinking goes.

If US producers are doing well, they’ll hire more people, Trump expects. He’s calculating that more people working for US companies doing well will make for a strong economy and happy voters.

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Parts of America have been severely impacted by factory closures as companies move to parts of the world with cheaper wages and operating costs.

This accelerated since the 1990s when the North American Free Trade Agreement (NAFTA) made it easier and cheaper to export to the US, reducing the incentive to produce in the country.

Donald Trump campaigns in North Carolina. Pic: Reuters
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Donald Trump campaigns in North Carolina. Pic: Reuters

Blue-collar workers, traditionally not college-educated, lost and continue to lose out majorly from plant closures. These are the voters Trump is targeting and who form his base of support.

It’s worth noting Trump isn’t the only fan of tariffs with the Biden administration implementing them on Chinese electric cars, solar panels, steel and aluminium as it sought to protect the investment it had made in such industries from cheap and heavily subsidised goods.

What will the effect be?

China, unsurprisingly, will be levied the highest and experience the greatest direct strike.

The hit will be “notably negative”, according to analysis from the National Institute of Economic and Social Research (NIESR), a leading thinktank.

It will face short-term pressures on manufacturing and trade with its gross domestic product (GDP) – the measure of everything produced in the country – to fall about 1% a year for two years, NIESR says.

Economists at Capital Economics quantify the cost at about a 0.5% to 0.7% reduction in GDP.

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UK should ‘expect’ Trump tarrifs

The US

That said the effects will be felt most keenly by those living in the US who will pay more.

If usually cheap imported goods get pricier that probably will cause the overall rate of inflation to rise.

Here the knock-on influences emerge. Higher inflation will just mean more expensive borrowing through upped interest rates as the US central bank, known as the Fed, will act to reduce inflation.

There’s no mystery around how high interest rates can weigh on an economy, the literal goal of hiked rates is to suppress buying power and to take money out of the economy.

Fears of the US ending up in recession spooked stock markets and triggered a global sell-off just three months ago.

Stock prices can seem nebulous but they impact the value of most people’s pensions.

A recession isn’t predicted but the US economy will falter, NIESR says.

Economic growth in America, as measured by GDP, would decrease by around 1.3 to 1.8 percentage points over the next two years, depending on whether the countries it trades with retaliate, upping their own duties on US goods.

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Worldwide reverberations

As tariffs make exporting less favourable exporters will simply export less, meaning less is produced and the worldwide economy slows.

The blow to the global economic output could be a 2% GDP drop after five years of Trump being in office, according to NIESR.

The consequences of Trump tariffs won’t just be short-term, NIESR forecasts, with global GDP still lower than it would have been without the imposition even in 15 years’ time.

Specific countries will be hit worse than others: Mexico and Canada for whom the US makes up roughly 80% and 50 % of trade, respectively will experience the greatest pain.

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The EU

It doesn’t look too bad for the European Union (EU) by comparison and could even be good for the bloc, some say.

NIESR reckons the euro area will be less badly affected than the UK over five years but the immediate impact will be worse.

The good news first: if Trump doesn’t lean too heavily into tariffs and focuses more on cutting taxes to grow the economy that bump could lead to stronger demand for European goods, notwithstanding import levies, suggests research from economic advisory firm Oxford Economics.

The bad news: it won’t look so good if the US economy turns bad through more aggressive policies like high tariffs on more goods, the firm says. That would mean a “large” fall in European exports, it adds.

And finally, some neutral news: not even high tariffs would be inflationary for the continent, Oxford Economics expects. Reduced demand and lower goods prices would just offset the higher import costs, it says.

Another firm, Capital Economics, also isn’t too concerned about the European economy under Trump.

“Smaller than many fear”, is how it described the suspected short-term macroeconomic consequences.

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How does the US election work?

What about the UK?

It’s got to be bad for the UK, right? The US is the country’s biggest trading partner after all, making up just under 20% of our trade

Again, not so. The UK doesn’t even make it into the top 10 worst-affected countries under NIESR’s research.

Capital Economics anticipates the knock would be small and maybe even positive, though inflation may be higher than if there were no second Trump administration.

But there’s no consensus on this point with NIESR forecasting GDP will be lower because of fewer exports and higher global interest rates.

This downturn would slow UK exports to other countries, NIESR says.

NIESR estimates UK GDP could be between 2.5% and 3% lower over five years and 0.7% lower in 2025. So instead of the 1.5% rate of GDP predicted by the IMF for next year, the economy would grow by 0.5%.

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Ryanair urges EU chief to ‘quit’ over air traffic strike disruption

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Ryanair urges EU chief to 'quit' over air traffic strike disruption

The boss of Ryanair has told Sky News the president of the European Commission should “quit” if she can’t stop disruption caused by repeated French air traffic control strikes.

Michael O’Leary, the group chief executive of Europe’s largest airline by passenger numbers, said in an interview with Business Live that Ursula von der Leyen had failed to get to grips, at an EU level, with interruption to overflights following several recent disputes in France.

The latest action began on Thursday and is due to conclude later today, forcing thousands of flights to be delayed and cancelled through French airspace closures.

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Mr O’Leary told presenter Darren McCaffrey that French domestic flights were given priority during ATC strikes and other nations, including Italy and Greece, had solved the problem through minimum service legislation.

He claimed that the vast majority of flights, cancelled over two days of action that began on Thursday, would have been able to operate under similar rules.

Mr O’Leary said of the EU’s role: “We continue to call on Ursula von der Leyen – why are you not protecting these overflights, why is the single market for air travel being disrupted by a tiny number of French air traffic controllers?

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File photo dated 02/09/22 of a Ryanair Boeing 737-8AS passenger airliner comes in to land at Stansted Airport in Essex. Ryanair has revealed around 63,000 of its passengers saw their flights cancelled during last week's air traffic control failure which caused widespread disruption across the industry and left thousands of passengers stranded overseas. In its August traffic update, the Irish carrier said more than 350 of its flights were cancelled on August 28 and 29 due to the air traffic contr
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Ryanair has cancelled more than 400 flights over two days due to the action in France. File pic: PA

“All we get is a shrug of their shoulders and ‘there’s nothing we can do’. We point out, there is.”

He added: “We are calling on Ursula von der Leyen, who preaches about competitiveness and reforming Europe, if you’re not willing to protect or fix overflights then quit and let somebody more effective do the job.”

The strike is estimated, by the Airlines for Europe lobby group to have led to at least 1,500 cancelled flights, leaving 300,000 travellers unable to make their journeys.

Ryanair chief executive Michael O'Leary speaks to journalists during a press conference at The Alex Hotel in Dublin. Picture date: Thursday October 3, 2024.
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Michael O’Leary believes the EU can take action on competition grounds. Pic: PA

Ryanair itself had axed more than 400 flights so far, Mr O’Leary said. Rival easyJet said on Thursday that it had cancelled 274 services over the two days.

The beginning of July marks the start of the European summer holiday season.

The French civil aviation agency DGAC had already told airlines to cancel 40% of flights covering the three main Paris airports on Friday ahead of the walkout – a dispute over staffing levels and equipment quality.

Mr O’Leary described those safety issues as “nonsense” and said twhile the controllers had a right to strike, they did not have the right to close the sky.

DGAC has warned of delays and further severe disruption heading into the weekend.

Many planes and crews will be out of position.

Mr O’Leary is not alone in expressing his frustration.

The French transport minister Philippe Tabarot has denounced the action and the reasons for it.

“The idea is to disturb as many people as possible,” he said in an interview with CNews.

Passengers are being advised that if your flight is cancelled, the airline must either give you a refund or book you on an alternative flight.

If you have booked a return flight and the outbound leg is cancelled, you can claim the full cost of the return ticket back from your airline.

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CBI kicks off search for successor to ‘saviour’ Soames

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CBI kicks off search for successor to 'saviour' Soames

The CBI has begun a search for a successor to Rupert Soames, its chairman, as it continues its recovery from the crisis which brought it to the brink of collapse in 2023.

Sky News has learnt that the business lobbying group’s nominations committee has engaged headhunters to assist with a hunt for its next corporate figurehead.

Mr Soames, the grandson of Sir Winston Churchill, was recruited by the CBI in late 2023 with the organisation lurching towards insolvency after an exodus of members.

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The group’s handling of a sexual misconduct scandal saw it forced to secure emergency funding from a group of banks, even as it was frozen out of meetings with government ministers.

One prominent CBI member described Mr Soames on Thursday as the group’s “saviour”.

“Without his ability to bring members back, the organisation wouldn’t exist today,” they claimed.

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Rupert Soames
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Rupert Soames. Pic: Reuters

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Mr Soames and Rain Newton-Smith, the CBI chief executive, have partly restored its influence in Whitehall, although many doubt that it will ever be able to credibly reclaim its former status as ‘the voice of British business’.

Its next chair, who is also likely to be drawn from a leading listed company boardroom, will take over from Mr Soames early next year.

Egon Zehnder International is handling the search for the CBI.

“The CBI chair’s term typically runs for two years and Rupert Soames will end his term in early 2026,” a CBI spokesperson said.

“In line with good governance, we have begun the search for a successor to ensure continuity and a smooth transition.”

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Ryanair and easyJet cancel hundreds of flights over air traffic control strike

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Ryanair and easyJet cancel hundreds of flights over air traffic control strike

Ryanair and easyJet have cancelled hundreds of flights as a French air traffic controllers strike looms.

Ryanair, Europe’s largest airline by passenger numbers, said it had axed 170 services amid a plea by French authorities for airlines to reduce flights at Paris airports by 40% on Friday.

EasyJet said it was cancelling 274 flights during the action, which is due to begin later as part of a row over staffing numbers and ageing equipment.

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The owner of British Airways, IAG, said it was planning to use larger aircraft to minimise disruption for its own passengers.

The industrial action is set to affect all flights using French airspace, leading to wider cancellations and delays across Europe and the wider world.

Ryanair said its cancellations, covering both days, would hit services to and from France, and also flights over the country to destinations such as the UK, Greece, Spain and Ireland.

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Group chief executive Michael O’Leary has campaigned for a European Union-led shake-up of air traffic control services in a bid to prevent such disruptive strikes, which have proved common in recent years.

He described the latest action as “recreational”.

Michael O'Leary. Pic: Reuters
Image:
Michael O’Leary. Pic: Reuters

“Once again, European families are held to ransom by French air traffic controllers going on strike,” he said.

“It is not acceptable that overflights over French airspace en route to their destination are being cancelled/delayed as a result of yet another French ATC strike.

“It makes no sense and is abundantly unfair on EU passengers and families going on holidays.”

Ryanair is demanding the EU ensure that air traffic services are fully staffed for the first wave of daily departures, as well as to protect overflights during national strikes.

“These two splendid reforms would eliminate 90% of all ATC delays and cancellations, and protect EU passengers from these repeated and avoidable ATC disruptions due to yet another French ATC strike,” Mr O’Leary added.

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