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How Trump’s Tariffs Could Impact Consumers in the US and UK—Even If Britain Is Exempt | US News


Donald Trump has imposed tariffs on goods imported from China, with additional tariffs expected for Mexico and Canada. What implications do these actions have for the UK?

The former president claims these tariffs—essentially taxes on imported goods—will aid in curbing illegal immigration and the illicit trafficking of fentanyl into the US.

On Saturday, Trump confirmed he would impose a full 25% tariff on imports from Mexico and Canada and a 10% tariff on Chinese goods.

These tariffs were anticipated to begin on Tuesday, with Mexico and Canada both indicating they would implement their own retaliatory tariffs. However, only China’s tariffs have taken effect, while those for Mexico and Canada have been suspended for a month.

A sign advising Canadian shoppers to consider local options instead, positioned in front of US alcohol at a store in Halifax, Nova Scotia, following Trump's tariffs on Canada. Pic: Reuters
Image:
A sign advising Canadian shoppers to consider local options instead, positioned in front of US alcohol at a store in Halifax, Nova Scotia, following Trump’s tariffs on Canada. Pic: Reuters

Both Mexico’s President Claudia Sheinbaum and Canada’s Prime Minister Justin Trudeau have announced these tariff pauses following discussions with Trump.

The leaders have committed to additional resources at their US borders to tackle illegal immigration in a bid to mitigate Trump’s trade conflict.

Trump has also hinted at potential tariffs against the European Union “very soon”.

Learn more about Trump’s tariffs:
What’s happening and what it means?

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China’s strategy in response to Trump’s trade war

Will Trump impose tariffs on the UK?

Thus far, no new tariffs have been announced for the UK, although Trump indicated in a BBC interview that the UK is “out of line”.

“However, I’m confident that this… can be resolved,” he added.

Trump’s primary concern revolves around trade deficits—wherein imports from another country surpass exports.

UK ministers have noted in the past that the UK may be able to evade tariffs since the US does not maintain a trade deficit with Britain.

Ed Conway’s analysis:
How the UK might unintentionally sidestep Trump’s trade skirmish

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Implications of Trump’s tariffs on Britain

Despite his warnings, Trump was also positive towards the UK, stating that his interactions with Prime Minister Sir Keir Starmer have been “very pleasant”.

“We’ve had several meetings and numerous phone calls. We’re getting along splendidly,” he remarked.

When asked by Sky News’ political editor Beth Rigby if he had any concerns, Sir Keir responded that it’s still “early days” and emphasized the importance of maintaining open and robust trading relations, which have formed the basis of his conversations with Trump.

Donald Trump and Keir Starmer. Pic: Reuters
Image:
Donald Trump and Keir Starmer. Pic: Reuters

How tariffs might affect consumers, even if the UK is spared

Even in the absence of tariffs on UK exports, consumers may still feel the impact of a trade conflict.

Economists widely predict that tariffs will elevate costs in the US, leading to inflation that could sustain elevated interest rates. The US Federal Reserve is obligated to take measures to lower inflation.

Rising borrowing costs and higher prices for goods and services could trigger a recession in the US, which is the world’s largest economy.

Such global shifts could also affect the UK.

Analyses from the National Institute of Economic and Social Research (NIESR) suggest that UK economic growth may decline as a result of rising global interest rates.

They project that UK GDP—reflecting all produced in the economy—could decrease by between 2.5% and 3% over five years and by 0.7% this year alone.

Further reading:
Why has Trump focused his tariffs on Mexico and Canada?

Retaliatory tariffs from Canada and Mexico

Some economists argue that the UK may not be significantly affected even if Trump imposes tariffs on British products.

The UK primarily exports services such as banking and consulting, which are typically not subject to tariffs.

Nonetheless, the Centre for Inclusive Trade Policy think tank estimates that a 20% across-the-board tariff affecting the UK could lead to a £22 billion decline in exports to the US, with the fishing and mining sectors facing the most severe impacts.

The British government aims to safeguard its economic growth initiatives, which are already encountering obstacles.

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Starmer: Prioritizing growth

What if Trump continues with tariffs post-pause?

There remains a possibility that Trump will resume plans for tariffs on Canada and Mexico despite the announced pause.

If enacted, Canadian energy—including oil, natural gas, and electricity—would incur a 10% tariff in addition to the 25% tariff on Mexican and Canadian goods.

While the Trump administration argues that this 10% tariff would increase domestic energy production, economists warn of broad negative consequences for US consumers should it be implemented.

They predict disruptions to supply chains and increased costs for businesses, ultimately leading to a general price increase.

Both Canada and Mexico rely significantly on trade, with imports and exports constituting approximately 70% of their GDPs, thereby escalating their vulnerability to the new tariffs.

In contrast, China, which relies on trade for only 37% of its economy, has focused on boosting domestic production, making it comparatively more resilient.

Below, we explore how US consumers might feel the impact of tariffs should they come into effect:

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Focus of tariffs on Mexico and Canada

Impact on avocados and other produce

The US sources between 50% and 60% of its fresh produce from Mexico—80% of its avocados, according to the US Department of Agriculture.

Canada also constitutes a significant supplier of fresh fruits and vegetables to the US, primarily from greenhouse production just across the border.

This reliance means that increased tariffs would likely translate into higher prices for consumers.

While the US continues to cultivate a considerable portion of its own produce, reliance on domestic products could result in those suppliers raising their prices as well.

Avocados from Mexico displayed in a US store. Pic: Reuters
Image:
Avocados from Mexico displayed in a US store. Pic: Reuters

Effects on gasoline and oil prices

Oil and gas prices are likely to be affected, as Canada is responsible for approximately 60% of US crude oil imports, with Mexico contributing around 10%.

According to the US Energy Information Administration, last year the US imported about 4.6 million barrels of oil daily from Canada and around 563,000 from Mexico.

Most US oil refineries are specifically designed to refine Canadian products, complicating and raising costs when shifting to alternative suppliers.

Economists predict that oil tariffs could result in fuel prices rising by as much as 50 cents (40p) per gallon.

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Trump 100: Examining his blame on diversity initiatives for the Washington DC plane crash

Vehicles and parts

The US automotive sector includes a complex interplay of domestic and foreign manufacturers.

The supply chain is intricate, with car parts and incomplete vehicles frequently crossing the US-Mexico border multiple times before reaching consumers. If tariffs persist, these parts will be taxed at each border crossing, leading to even steeper price increases.

In response, General Motors has indicated plans to expedite exports from Mexico and Canada while exploring ways to shift manufacturing to the US.

Consumer electronics

When Trump imposed a 50% tariff on imported washing machines during his initial term in 2018, consumers faced prolonged price increases.

China produces a large share of global consumer electronics—including smartphones and computers—so the 10% tariff could similarly affect these products.

The Biden administration has attempted to legislate to support domestic semiconductor production, but the US continues to rely heavily on Chinese products.

Consequently, consumers may see higher prices unless tech companies can relocate their manufacturing out of China.

Benefits for the steel sector

The steel and aluminum industries may benefit the most from Trump’s tariffs, as they have long lobbied for protective measures against foreign competitors who dominate the market, threatening US factories.

If the tariffs elevate steel prices, this could incentivize domestic production, potentially saving some plants from closure.

However, when Trump previously raised steel tariffs, prices increased across the board, forcing businesses to pass these costs onto consumers and affecting their ability to meet construction budgets.

Overall inflation concerns

The increase in prices across these goods inevitably leads to widespread overall inflation.

According to Capital Economics, the tariffs targeting Canada and Mexico could push inflation beyond 3%—significantly exceeding the Federal Reserve’s 2% target—and the imposition of tariffs on China would likely exacerbate this trend.



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