It’s only been a few weeks since US President Donald Trump first announced his plans to raise tariffs for almost every other country in the world – including some islands populated only by penguins. But unless you’ve become an overnight expert in international trade and supply chains, you’re probably wondering what – if anything – the news means for you, especially now that most tariffs have been frozen at 10% for at least 90 days. Will some everyday items be cheaper? Are there products to rush out and buy now, before tariffs go up again? Here’s everything you need to know.
Hang on, what is a tariff exactly?
First, a reminder. A tariff is a tax that’s paid when something is produced in another country and then brought over the border.
Most countries have tariffs on some imports, but the US recently imposed a general 10% tax on goods from most countries and has threatened (and then paused) even higher tariffs.
There are sector-specific tariffs, too, such as the 25% in duties on any cars being imported into the country. As the US is the largest export destination for British-made cars (6.4 billion pounds’ worth of car exports in 2023, according to the Office for National Statistics), it’s not great news for the British car industry, unless the UK can negotiate a trade deal that includes vehicles.
Increasing taxes on goods usually means that the consumer ends up being charged more – which would affect American consumers in this case. However, we’re not immune in the UK, as many companies will try to spread the cost globally rather than let US shoppers bear the brunt of the price increases. So what prices are most likely to be affected in the UK?
Will tariffs affect UK prices?
Tech
Recent years have taught us that when there are economic disturbances around the world, it can mean we end up paying more – and certainly the games console market seems to suggest that’s exactly what will happen.
Large tech companies may not want to heap all the extra cost on to the US consumer, so they might raise prices globally instead.
Sony, for example, announced this week it would hike the price of its PlayStation 5 console by 10% in Britain, as a result of high inflation and fluctuating exchange rates. That means the price of the digital edition is rising £400 to £429.99.
That’s the first big brand to make such a clear increase, but it’s unlikely to be the last. In theory, iPhones sold in the UK are unaffected – but again, Apple may well decide to recover costs globally rather than place the entire burden on Americans.
That may mean that, if the price is currently right for you, it could be worth buying a big-ticket item such as a smartphone or computer sooner rather than later.
Clothes
Cheap Chinese fashion is set to become much more expensive in the US after the eye-watering 145% tariff, and some big American brands that make products in Asia will also be hit. This means companies could raise prices globally – and the UK customer could end up helping to foot the bill.
However, there’s also a possibility that it becomes too expensive for China to send products to America so it instead ships more to Europe, potentially meaning prices on things like clothes and toys actually come down.
That could be good news for consumers who want a bargain – but be careful. If you’re finding bargains online, make sure you read the reviews and check what safety standards the items are made to. Cheaper is only better if the quality doesn’t suffer.
Petrol
When it looks like the world is heading for an economic slowdown, that often means that the price of oil drops. It’s used not just in travel but also manufacturing, so if demand is expected to fall, the oil price often follows.
In fact, Goldman Sachs bank says it expects oil prices to decline this year and next year. That may not say great things about the shape of the global economy, but it may mean cheaper prices at the pumps.
Some petrol stations are already passing that on, although it can take time for the savings to reach drivers. It does mean it’s worth comparing petrol prices and finding the cheapest in your area.
Mortgages
One positive from the economic uncertainty is that mortgage rates have already started to fall. In the UK, the Bank of England sets a base interest rate that many banks use to price up their mortgages. It’s currently 4.5% and analysts had expected that rate would only be cut twice this year.
Now, some experts predict there could be more cuts ahead, perhaps even to as low as 3.5% if the Bank needs to support the UK economy through the uncertainty.
Ian Futcher, financial planner at the wealth management company Quilter, says planning ahead is absolutely key and that borrowers should start thinking about their next mortgage six months before their current deal ends.
‘That allows them to move quickly and secure a competitive rate as they approach the end of their term,’ he says. ‘With mortgage pricing often fluctuating in response to economic news, being ready to act early can make a significant difference to monthly repayments.’
Pensions and investments
Even if you don’t consider yourself to be an investor, your pension savings will almost certainly be invested in the stock market.
If you’ve checked your pension or other investments, such as a stocks and shares ISA, in the last couple of weeks, then you may have had a shock. Straight after the tariffs announcement some of the main market indexes had their worst day since the beginning of Covid.
Now is the time to remember that pensions are a long-term game.
‘Over the years, periods of market upheaval are to be expected,’ explains Helen Morrissey, head of retirement analysis at the investment platform Hargreaves Lansdown. ‘Making knee-jerk reactions, such as changing investment strategy or cutting back on contributions, can crystallise losses and make it harder for your fund to recover, and this can impact your retirement income.
‘It’s important to make sure that your strategy is well diversified to protect your pension from these ups and downs. Keeping contributions regular also means you can benefit from market downturns by being able to buy more units when prices are low.’
For anyone close to retirement who therefore can’t take time to recover, this is more difficult. One option is to delay drawing an income for as long as possible, to give investment pots time to recover.
Savings
Although your cash savings won’t be hit in the same way that any investments may have been, it doesn’t mean you can relax.
If the Bank of England does cut interest rates, that could mean you earn less for your cash savings. Another possibility is that inflation rises, meaning the money in your account is worth less.
Whatever happens, it’s really important to check your money is working as hard as possible. There are accounts out there paying as high as 5% on an easy-access account, so check if your money would be better in a more competitive account.
Could tariffs lead to a recession (and what should I do about it)?
The UK officially falls into a recession if there are two quarters (three-month periods) of what economists call ‘negative growth’, which means six months where the economy shrinks.
Right now, there’s no indication that’s going to happen. In fact, the latest numbers from the ONS show that the economy grew unexpectedly strongly in February. So don’t panic.
Having said that, there could be trouble ahead. Any lengthy trade standoff between the US and China could have an impact on how much our economy grows, because they’re the two largest economies in the world.
There’s not much you can do individually about the UK’s economic growth, but you can make sure you have a financial cushion to protect you from whatever happens next.
Having at least three months’ worth of income stashed in an easy-access savings account is a healthy safety net in a time of turbulence. If that seems unaffordable, then remember that having any money saved at all gives you more security. Now is the time to clear that overdraft, pay off any buy-now-pay-later debt and build up that rainy day fund.
There are a lot of unknowns in the coming weeks and months, but the more secure you can make your own finances, the better prepared you’ll be.
