Following US president Donald Trump’s announcement of a global tariff package on Wednesday evening, the dollar weakened against the pound and euro. USD is currently down 1.4% against both GBP and EUR.
The president’s announcement came after weeks of threats and it is worse than many analysts feared. 10% tariffs will be applied to all US imports as standard and further “reciprocal” tariffs will be applied on a per country basis, ranging from 10 – 50%.
The immediate impact has seen global stock market sell offs as traders look for safer places to store their money. Gold prices hit another all-time high, at one point selling for $3,167.57 per ounce, and the pound reached $1.31 as the dollar weakened.
For the UK, that additional levy is comparatively light at only 10%. However, it is still likely to see the UK’s growth forecast downgraded. Just last week, in the Spring Statement, Chancellor Rachel Reeves cut billions in welfare benefits to maintain the government’s £10bn of fiscal headroom and that could be wiped out by a reduction in US exports.
The UK government previously ruled out retaliatory tariffs, aiming instead for a trade deal that would see the country exempt from Trump’s tariffs. That deal has so far not materialised, but analysts hope the UK is at the front of the queue.
Europe has been hit with an additional 20% tariff on all its exports to the US. There was an additional dose of pain for Germany as on top of the 10% standard tariff and 20% retaliatory tariff, there is a an additional 25% on automobile imports. The EU has said it will apply a package of tariffs on US exports in retaliation.
Currently, like sterling, the euro is climbing against the dollar as traders look for safer markets for their money but, according to European Commission president Ursula von der Leyen, the global economy “will massively suffer”.
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