US tariffs will have ‘massive consequences’ say experts

It was the announcement the world saw coming, but no one could have predicted just how far American President Donald Trump would take his international tariff measures when he took to the podium yesterday (2nd April).

Proclaiming the date as ‘Liberation Day’, Trump singled out 60 countries for reciprocal tariffs from 5th April, with the EU facing the sharpest rise in rates at 54%, while Japan (24%) and China (20%) were handed down the second and third steepest tariffs.

During his speech, the President imposed a ‘baseline’ 10% global tariff on all imports, which will likely, say experts, have a seismic, ripple effect across the world, as businesses and therefore consumers find themselves faced with bigger costs for everything from food and drink, to cars, with talk of stock market drops, trade wars, and a weaker British pound.

The NFU, already battling with our own Government over agricultural IHT changes and the freezing of important grants, has said the imposed tariffs will also impact Britain’s farmers, with the US being the largest market for British agri-food products outside of the EU.

NFU president, Tom Bradshaw, said, “We have been working closely with the Government in the lead up to the announcements. While the UK has been hit by a lower baseline tariff compared to the EU, this remains a challenge for the UK and for agriculture.

“While this is a developing and concerning situation, we are working in genuine partnership with the Government and sharing our expertise on this to ensure, if there is any market disruption in response to a change in the movement of goods and products between affected countries, we can respond swiftly.”

Tom added British farmers are proud to supply authentic, quality and unique British meats and cheeses to American consumers.

“We stand united in our desire to work together to ensure British farmers and growers are at the forefront of any decision-making and will continue to work hand in glove with government as the situation develops.”

Economic advisor of Global Economy at Cranfield School of Management, professor Joe Nellis thinks the newly imposed tariffs will contribute to the deglobalisation of our trade system and restructuring of global trading relationships, which have for so long worked to ensure the availability of affordable imported goods, keeping worldwide inflation lower than it would have otherwise been.

“The post-WWII global economy (especially since the 1990s) has been marked by growing interconnectedness and trade liberalisation, leading to hundreds of millions of people in developing economies being lifted out of absolute poverty,” Joe said. “There is a valid fear that the deglobalisation of the world economy could halt this progress. When a trade war really kicks off, it is the poorest without the muscle to fight back who suffer the most.”

The tariffs will effectively, said Joe, subsidise US firms – some of which were previously struggling and would not have survived in the global free market. But the end result is “inefficient and uncompetitive businesses dragging down the US economy”.

How will this impact UK consumers? “Prices will most likely rise almost immediately, particularly for goods such as electronics, so inflation is certainly a worry,” said Joe. “However, we are likely to see some trade diversion. Goods that would have gone from China to the US could instead be diverted to the UK to avoid heavy tariffs. Cheap goods could reduce inflation in the UK, but would impact businesses, as they are forced to compete with foreign businesses flooding the market.” If this were to happen, Joe said, it would take some time for the effects to kick in.

“Could there be a trade war and retaliation?” he reflects. “While unlikely to take the US on head-to-head, the UK Government cannot sit back and do nothing as the economy is severely disrupted. There must be some form of reaction in the coming days.”