Michael Race
Business Reporter, BBC News
Getty images
US President Donald Trump has announced new taxes on imported goods imported into America into the last climbing of the world trade war.
The United Kingdom has been affected by a 10% rate on all its products brought to the United States, which, according to Trump, is a reprisals at the British prices on American goods, but uncertainty remains on the potential impact on British consumers.
Here’s how you and your money could be affected.
1. Prices could increase, but could also decrease
The prices that Trump has just announced will be paid by companies that import goods in the United States.
Clarissa Hahn, an economist at Oxford Economics, says that it means that the initial impact of price increases will be on American consumers, as American companies are likely to pass on additional costs to their customers.
However, she adds that people in the United Kingdom could subsequently be affected by the measures, which come into force on April 5.
One way is via the value of the book and exchange rates, which dictates the cost to British companies to import goods and raw materials from abroad. If the import costs increase, these additional costs could be passed on to consumers thanks to higher prices.
After Trump’s speech on Wednesday, exchange rates between the dollar and the book fluctuated. If the value of the dollar is strengthening as some economists have predicted, import costs could increase for British companies to import goods.
Higher prices in the United Kingdom could also “encourage workers to demand higher wages”, which would still increase costs for businesses, according to Ahmet Ihsan Kaya, principal economist, at the National Institute for Economic and Social Research.
Hahn adds that if the British government decides to retaliate with clean prices on American products entering the United Kingdom, there is a risk that the prices of the United Kingdom could increase if British companies reduce additional costs to customers.
However, some economists have suggested that prices may also fall initially following Trump’s decision to impose prices.
Swati Dhingra, economist and member of the Banque of England Monetary Policy Committee, which establishes interest rates, suggested that companies normally send their goods to the United States, can rather send them to countries like the United Kingdom which do not have such high prices, which potentially leads to a less expensive flow of goods in the United Kingdom.
“The prices of the proposed scale are likely to cause companies that export to the United States to reduce its prices to maintain demand for their products,” she suggests.
2. This could affect your work
British companies exporting goods to the United States are defined by the latest measures.
The United Kingdom has exported nearly 60 billion pounds to the United States last year, mainly machines, cars and pharmaceuticals. Other industries, which are major exporters in the United States, include fishing and electronics.
If the American demand for British products decreases due to the additional costs that importers face, this could reach beneficiary margins and ultimately lead to job cuts in the United Kingdom unless British companies find new customers outside the United States.
According to the Institute for Public Policy Research Institute, Jaguar Land Rover and the Mini Cowley factory, Oxford, seem to be the most exposed prices for cars.
He indicates that more than 25,000 jobs in the British car manufacturing industry “could be in danger” with a price of 25% in force on Thursday, with one in eight car built in the United Kingdom exported to the United States.
The pharmaceutical industry also depends strongly on trade with the United States, explains Ms. Hahn, by Oxford Economics.
The United States represents 40% of Astrazeneca sales and 50% GSK. Although the two companies whose headquarters have manufacturing facilities in America, raw ingredients for drugs and vital vaccines move between the United Kingdom, the EU and the United States. Under the prices, companies could be affected by several tax costs while they cross borders to be developed.
There is also the problem of the functioning of prices when they collide with pricing ceilings that the NHS and other health organizations combine to buy bulk medicines.
3. Interest rates can remain higher
British interest rates dictate the costs that households have to pay to borrow money for things such as mortgages, credit cards and loans. Higher rates also increase yields for savers.
They are currently at 4.5%, but economists predict two other rate drops by the end of the year.
However, the Bank of England underlined the American prices as a reason why it avoided last month reduction rates, saying that economic and global uncertainty was “intensified”.
If prices are pushed long enough to affect the inflation rate – this could mean that interest rates remain higher.
Andrew Bailey, the governor of the Bank of England, said that it was the work of the bank “to ensure that inflation remains low and stable” and it would be “very closely” to the impact of prices.
