\n\t\t\t\t\tNew US tariffs are bad news for Britain with the potential to hit pensions, benefits, taxes, jobs, savings and prices\t\t\t\t\t <\/p>\n
Donald Trump\u2019s<\/a> unprecedented tariffs<\/a> and escalating trade war with China have triggered mass panic on stock markets <\/a>and warnings of a global recession<\/a> that could hit the UK hard.<\/p>\n It is difficult to see how the trade war will play out, with the US President on Tuesday imposing 104 per cent tariffs on Chinese products. However, it is already creating a number of economic headaches for Sir Keir Starmer <\/a>at a time when Britain\u2019s economy was already stuttering.<\/p>\n Here are some of the issues the Prime Minister is facing:<\/p>\n Drop in the value of pensions<\/p>\n The plunge in global equity markets triggered by Trump\u2019s tariffs is believed to have wiped billions of pounds off the value of pension pots<\/a>, which are typically invested in stocks and shares.<\/p>\n It means those looking to make big lump-sum withdrawals now face taking home much less money than just a few weeks ago, prompting experts to advise those who can, to wait until drawing down large sums of cash from their pension pots.<\/p>\n That might be putting off home extensions, big new purchases or less money for grandchildren\u2019s university \u2013 all of which could have knock-on effects on the wider economy.<\/p>\n ISA plan in disarray<\/p>\n The Government has been planning to cut <\/a>the \u00a320,000 annual amount people can deposit into cash ISAs \u2013 tax-free saving accounts \u2013 to as low as \u00a34,000 in a bid to push savers towards their stocks and shares equivalent, where the money is invested in companies and funds, in a bid to boost economic growth and generate greater returns.<\/p>\n But with stock markets in freefall, Rachel Reeves <\/a>is being urged by economists to rethink her plans, as it will force savers to take risks with their money at a time of major uncertainty.<\/p>\n Reeves is trying to pull every lever to boost flagging economic growth, and having to reverse her plans on ISAs<\/a> would damage this effort.<\/p>\n Blow to British business <\/p>\n British firms exported \u00a3182bn-worth of goods to the US last year. They are all now being hit by 10 per cent tariffs when they enter the US.<\/p>\n The tariff rate may be lower than other American allies such as the EU or Japan, but it will still make UK products significantly more expensive in America, making it harder for firms to sell their products Stateside and potentially reducing profit margins.<\/p>\n And some sectors are being hit even harder.<\/p>\n UK car manufacturers<\/a> face a 25 per cent tariff for all vehicles they send to the US. Starmer has taken rapid action to try to protect the car industry<\/a>, which counts the US as its second largest export market after the EU, with transatlantic trade worth \u00a38.3bn. But one major firm \u2013 Jaguar Land Rover \u2013 has already paused exports as it takes stock of the situation.<\/p>\n Steel and aluminium are also facing higher 25 per cent tariffs, adding to the pressure on the UK\u2019s domestic steelmaking \u2013 which was already hanging by a thread <\/a>after years of decline \u2013 as well as defence exports to America.<\/p>\n Other industries such as food and drink are predicted to suffer, and the levies could lead to job losses.<\/p>\n According to an analysis from Deutsche Bank, Trump\u2019s tariffs will put between 50,000 and 100,000 people out of a job in the UK.<\/p>\n At the same time, businesses from other countries may send products that were bound for the US to the UK and other countries with lower tariffs, and sell them at a cut price \u2013 a practice known as dumping.<\/p>\n Flooding the market with cheap goods may bring down prices for British consumers, at least in the short term, but it threatens to undercut UK businesses, which could reduce profit margins and put more jobs in affected industries at risk.<\/p>\n Spending cuts<\/p>\n Whether or not Trump\u2019s tariffs push the UK into recession, most economists predict they will deliver a sizeable blow to Britain\u2019s already stuttering economic growth.<\/p>\n This threatens to wipe out the \u201cheadroom\u201d \u2013 or spare cash \u2013 Reeves has available to meet her fiscal rule on controlling government borrowing.<\/p>\n The Chancellor is so far resisting calls to relax this rule, meaning that in her autumn Budget she may once again have to cut spending on welfare or public services \u2013 as she did just last month<\/a> \u2013 to balance the books.<\/p>\n More cuts to Whitehall spending and benefits <\/a>\u2013 many of which go to people in work \u2013 are likely to hit those who are already struggling to make ends meet or are relying on increasingly stretched public services.<\/p>\n Higher taxes<\/p>\n The other option available to Reeves if she wants to keep her fiscal rules in place is to raise taxes to generate more money for the Government.<\/p>\n Experts have suggested that the best way to do this, while protecting fragile economic growth, would be to raise the basic rate of income tax or increase VAT. But hitting people\u2019s wallets in such a direct way could be politically difficult for a party which pledged not to raise taxes for working people.<\/p>\n The Chancellor also promised that she will not repeat last October\u2019s Budget<\/a>, which included \u00a340bn of tax rises.<\/p>\n But Reeves has refused to rule out extending the freeze on income tax thresholds beyond 2028, despite having in October committed to ending it, which raises the prospect of more people being pulled in to paying higher rates of tax as their wages rise in the coming years.<\/p>\n Some Labour MPs want higher taxes on the rich, such as a wealth tax<\/a>, but Reeves is believed to be reluctant.<\/p>\n However, having already grabbed some of the low-hanging fiscal fruit by raising employers\u2019 national insurance and capital gains tax, she may be forced to come up with alternatives.<\/p>\n Inflation<\/p>\n Some economists believe US tariffs could push up inflation <\/a>in the UK, which is already stubbornly high. The National Institute for Economic and Social Research has said that inflation could rise as the tariffs could make the dollar stronger than the pound, leading to American imports becoming more expensive.<\/p>\n This could add to the cost of living crisis <\/a>as Britons already face rising bills <\/a>for energy, water and council tax this month.<\/p>\n Others, however, believe inflation could fall, so long as Starmer continues to resist retaliation against Trump by slapping tariffs on US imports to the UK.<\/p>\n The \u201cdumping\u201d of goods in the UK that overseas exporters are no longer able to send to the US, while bad for British firms, could also bring prices down.<\/p>\n This could mean the Bank of England <\/a>reduces interest rates <\/a>more quickly, bringing down mortgage costs<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"New US tariffs are bad news for Britain with the potential to hit pensions, benefits, taxes, jobs, savings…\n","protected":false},"author":2,"featured_media":11041,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3093],"tags":[51,1700,474,476,807,2499,7570,479,1200,16,15],"class_list":{"0":"post-11040","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-economy","10":"tag-finance","11":"tag-inflation","12":"tag-keir-starmer","13":"tag-personal-finance","14":"tag-politics-long-read","15":"tag-tariffs","16":"tag-tax","17":"tag-uk","18":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114319990673523045","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/11040","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=11040"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/11040\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/11041"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=11040"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=11040"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=11040"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}