Dharshini David, the Deputy economics editor, has raised concerns over the escalating trade war and its potential impact on the global economy. The trade tensions between the US and China have intensified, with both countries imposing increasing tariffs on each other. While other nations have seen a temporary relief as Donald Trump has delayed implementing higher taxes on US imports for 90 days, the UK still faces additional charges on goods sold into the US.
British businesses, including car manufacturers and food producers, are directly affected by the trade war as American importers now have to pay 10% more for their products. This poses a challenge for UK companies as they navigate whether to absorb the increased costs, share it across the supply chain, or pass it on to customers. The threat of reduced sales from tariffs could impact jobs and investment plans, while increased competition from other nations may further squeeze UK businesses.
The blow to growth from the trade war is expected to be less severe in the UK compared to other countries due to the nature of British exports to the US. With two-thirds of exports being services that are not subject to tariffs, the UK’s trade portfolio is strengthened. However, the demand for services linked to goods could be affected by tariffs, potentially impacting sales in the US and other countries. The Bank of England warns that weaker global growth could pose risks to the UK’s financial stability, prompting concerns about future tax rises in the upcoming Autumn Budget.
Amidst market volatility, movements in the bond markets and wild swings in stock markets globally have implications for UK investors. Falling share prices reduce the value of ISAs and pension funds, although experts suggest that such funds are long-term investments that tend to balance out over time. The potential impact of falling oil and commodity prices on inflation has led to speculation that the Bank of England may cut interest rates multiple times this year, offering relief to households. Despite the challenges ahead, the UK’s low debt levels relative to income and strong banking system may help weather the storm of the ongoing trade war
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