Policymakers count cost of Trump tariffs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A day after Donald Trump announced plans for fresh tariffs on Canada, Mexico and China, policymakers around the world are digesting the consequences of âTariff Manâ Trump returning to the White House.
A deputy governor at the Bank of England, Clare Lombardelli, has warned that the president-electâs proposed trade tariff would pose a risk to economic growth in countries including the UK.
Speaking to the Financial Times, Lombardelli explained that Trumpâs trade policies could hit growth in the short term, while long-term productivity also suffers from increased trade frictions.
She says:
âI donât want to speculate on the specifics but we know barriers to trade are not a good thing, whether they are tariffs or regulatory or others.
âWhether you are an economic historian, an economic theorist or a data-driven economist, the impact is clear in terms of its direction. In terms of its size, that depends on the circumstances.â
Trump rattled the financial markets yesterday by announcing he would impose 25% tariffs on Canada and Mexico, and an extra 10% on China, in a crackdown on immigration and drugs.
Trade experts fear that Trump could spark a global trade war, if other countries retaliate with their own tariffs in response.
Keith Rockwell, a former director at the World Trade Organization, explained:
âThe United States exports hundreds of billions of dollars worth of goods to these countries. Anyone who expects that they will stand pat and not retaliate has not been paying attention.â
Trumpâs proposed tariffs are likely to push up inflation in the US, as importers will pass the higher costs onto consumers â and possibly add a bit more on top!
But they could have a deflationary impact on other countries; China, for example, could reroute shipments to Europe rather than the US, cutting prices to support its sales.
They also pose a political dilemma for the UK â should it try to align with the US, to avoid being hit by tariffs too, or try to get closer to the EU?
Simon Sutcliffe, Customs & Excise Duty Partner at accountancy firm Blick Rothenberg, says the US hasnât considered such a protectionist trade policy since the 1930s with the Smoot-Hawley Act â which ended up fuelling the Great Depression.
Sutcliffe says Sir Keir Starmer faces a dilemma:
One of the biggest stumbling blocks in the UKâs trading relationship with the EU is the control and administration surrounding the movement of food products. Moving closer to the EU may allow development of a consistent and streamlined food policy which would reduce trade red tape and extra charges.â
âHowever, aligning with the US would undermine that attempt, as the EU would be exceptionally resistant to allow US originating food products to âseepâ into its marketplace, resulting in the administrative burden on food movements being cemented in for longer.â
âBut âRefusingâ the US may result in UK exporters being subject to US tariffs on their products. The US is the largest individual trading partner of the UK trading with roughly 30% of our total exports going to the US and the US exporting 10% of its goods to the UK, so any tariffs would have a big impact on UK trade.â
Also coming up today
Weâll get a full-body health check on the US economy today, with a flurry of economic data â from GDP to trade and jobless claims â being rushed out ahead of the Thanksgiving holiday tomorrow.
The agenda
-
9.30am GMT: GfK survey of German consumer confidence
-
Noon GMT: US weekly mortgage approvals data
-
1.30pm GMT: US Q3 GDP report (second reading)
-
1.30pm GMT: US durable goods orders for October
-
1.30pm GMT: US weekly jobless claims data
-
1.30pm GMT: US trade balance for October
-
3pm GMT: US PCE inflation measure for October
Key events
The French stock exchange, the Cac 40, has dropped to its lowest level since the market wobble of early August.
The Cac 40 is down 0.8% at a three-month low, led by bank stocks, and exporters such as Renault (-2.1%) and STMicroelectronics (-1.7%).
Back in the UK, the competition watchdog has reported that loyalty card pricing at UK supermarkets is not always the cheapest option for consumers.
In a new report, the Competition and Markets Authority (CMA) has found that loyalty prices do offer âgenuine savingsâ; after analysing 50,000 loyalty-priced products, it found 92% offered savings on the usual price.
Customers can make savings of up to 25% by buying loyalty priced products, according to the CMA. But it stressed that while they offer âlegitimateâ discounts, supermarket customers could still find cheaper alternative options by shopping around.
George Lusty, interim executive director of consumer protection, explains:
âWe know many people donât trust loyalty card prices, which is why we did a deep dive to get to the bottom of whether supermarkets were treating shoppers fairly.
âAfter analysing tens of thousands of products, we found that almost all the loyalty prices reviewed offered genuine savings against the usual price â a fact we hope reassures shoppers throughout the UK.
âWhile these discounts are legitimate, our review has shown that loyalty prices arenât always the cheapest option, so shopping around is still key.â
US tariffs would also have an impact on American consumers.
Economists at Deutsche Bank have calculated that if Trumpâs threatened tariffs were fully implemented, US core PCE inflation for 2025 could increase from 2.6% to 3.7%.
Before Trumpâs victory the assumption was for 2.3% inflation in 2025.
Share have rallied in China today, on hopes that Beijing may roll out new stimulus measures to protect its economy from Trumpâs tariffs.
The CSI 300 index has rallied by 1.75%, while stocks in Shenzhen are up over 2%.
Vis Nayar, chief investment officer at Eastspring Investments in Singapore, explains:
âWith the potential threat of tariff hikes in 2025, itâs likely Chinaâs policymakers would come up with further stimulus packages to counter downward economic growth pressure from domestic cyclical weakness and increased external uncertainty.
There remains plenty of scope for China to surprise the markets.â
Budget airline easyJet has swelled its profits, despite the turmoil in the Middle East hitting demand.
EasyJet has reported a pre-tax profit of £602m for the year to 30 September, £170m than the previous year.
This earnings surge was driven by strong demand over the summer; easyJet had made a loss of £350m in the six months to 31 March, as conflict in the Middle East led to flight cancellations, extra costs and revenues.
Outgoing CEO Johan Lundgren, says:
âThis strong performance – resulting in a 34% increase in our annual profits – reflects the effectiveness and execution of our strategy as well as continued popularity of our flights and holidays. It also represents a significant step towards our goal of sustainably generating over £1 billion annual profit before tax.
Profits were also lifted by charges for cabin bags and âleisure bundlesâ; last week, easyJet was one of five airlines fined in Spain for charging passengers for hand luggage and seat reservationsâ¦.
Lighthizer protegé named as US trade representative
Overnight, Donald Trump has picked a protegé of Robert Lighthizer, his trade representative in the first Trump administration, to lead trade policy in Trump 2.0.
Jamieson Greer, an attorney, will serve as the next US trade representative, Trump announced ovenight, and will be tasked with reining in the trade deficit and opening up âexport markets everywhereâ.
Greer, 44, served as chief of staff to Lighthizer, who designed Trumpâs original tariffs on some $370bn worth of Chinese imports, and also renegotiated the North American free trade deal with Canada and Mexico.
Lighthizer, an arch protectionist and sometime free-trade skeptic, blasted âglobalistsâ and other ideological free-traders in his recent book, âNo Trade Is Freeâ.
Kathleen Brooks, research director at XTB, says:
Trump has made more picks for his cabinet, including the trade representative, Jamieson Greer. He was a protégé of the tariff tzar in Trumpâs first term as president, Robert Lighthizer, and he is seen as trade hawk. This suggests that tariffs will be at the heart of Trumpâs trade agenda.
However, it is worth noting that as trade representative, Greerâs office will be overshadowed by the US Treasury. The new Treasury secretary, Scott Bessent, is moderate on tariffs, and has espoused free trade ideals in the past. This suggests that Trumpâs tariff talk may be more bark than bite, although Greerâs appointment is a nod to the trade hawks in his team.
Policymakers count cost of Trump tariffs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A day after Donald Trump announced plans for fresh tariffs on Canada, Mexico and China, policymakers around the world are digesting the consequences of âTariff Manâ Trump returning to the White House.
A deputy governor at the Bank of England, Clare Lombardelli, has warned that the president-electâs proposed trade tariff would pose a risk to economic growth in countries including the UK.
Speaking to the Financial Times, Lombardelli explained that Trumpâs trade policies could hit growth in the short term, while long-term productivity also suffers from increased trade frictions.
She says:
âI donât want to speculate on the specifics but we know barriers to trade are not a good thing, whether they are tariffs or regulatory or others.
âWhether you are an economic historian, an economic theorist or a data-driven economist, the impact is clear in terms of its direction. In terms of its size, that depends on the circumstances.â
Trump rattled the financial markets yesterday by announcing he would impose 25% tariffs on Canada and Mexico, and an extra 10% on China, in a crackdown on immigration and drugs.
Trade experts fear that Trump could spark a global trade war, if other countries retaliate with their own tariffs in response.
Keith Rockwell, a former director at the World Trade Organization, explained:
âThe United States exports hundreds of billions of dollars worth of goods to these countries. Anyone who expects that they will stand pat and not retaliate has not been paying attention.â
Trumpâs proposed tariffs are likely to push up inflation in the US, as importers will pass the higher costs onto consumers â and possibly add a bit more on top!
But they could have a deflationary impact on other countries; China, for example, could reroute shipments to Europe rather than the US, cutting prices to support its sales.
They also pose a political dilemma for the UK â should it try to align with the US, to avoid being hit by tariffs too, or try to get closer to the EU?
Simon Sutcliffe, Customs & Excise Duty Partner at accountancy firm Blick Rothenberg, says the US hasnât considered such a protectionist trade policy since the 1930s with the Smoot-Hawley Act â which ended up fuelling the Great Depression.
Sutcliffe says Sir Keir Starmer faces a dilemma:
One of the biggest stumbling blocks in the UKâs trading relationship with the EU is the control and administration surrounding the movement of food products. Moving closer to the EU may allow development of a consistent and streamlined food policy which would reduce trade red tape and extra charges.â
âHowever, aligning with the US would undermine that attempt, as the EU would be exceptionally resistant to allow US originating food products to âseepâ into its marketplace, resulting in the administrative burden on food movements being cemented in for longer.â
âBut âRefusingâ the US may result in UK exporters being subject to US tariffs on their products. The US is the largest individual trading partner of the UK trading with roughly 30% of our total exports going to the US and the US exporting 10% of its goods to the UK, so any tariffs would have a big impact on UK trade.â
Also coming up today
Weâll get a full-body health check on the US economy today, with a flurry of economic data â from GDP to trade and jobless claims â being rushed out ahead of the Thanksgiving holiday tomorrow.
The agenda
-
9.30am GMT: GfK survey of German consumer confidence
-
Noon GMT: US weekly mortgage approvals data
-
1.30pm GMT: US Q3 GDP report (second reading)
-
1.30pm GMT: US durable goods orders for October
-
1.30pm GMT: US weekly jobless claims data
-
1.30pm GMT: US trade balance for October
-
3pm GMT: US PCE inflation measure for October