Costly tariffs imposed on Trump's Liberation Day - how measures could hit your wallet

Among the significant measures is a 10% “baseline” worldwide tariff on all imports into the US, with even higher rates for specific nations. 

60 countries - which The White House has deemed the “worst offenders” - have been singled out for “reciprocal” tariffs, with the EU, China, and Japan facing some of the steepest rates; 54%, 20%, and 24% respectively. 

A tariff is a tax imposed on imported goods or services, often making them more expensive and potentially restricting trade. They are usually designed to encourage consumers to buy from a country’s own product, rather than rely on foreign imports. 

The UK has not escaped unscathed, and Trump has slapped a 10% tariff on US imports of UK goods - the same level as the global “baseline”, meaning it could not have been any lower.

Trump also confirmed that starting at midnight 5am on Thursday, 3 April in the UK, a 25% tariff would be applied to all foreign cars entering the U.S. The White House said that these tariffs would not be added to existing import taxes on steel or vehicles.

It simple terms, it means that because the US is imposing tariffs on UK goods, UK manufacturers and exporters will have to pay extra to sell their products in the US. 

This makes their goods more expensive for American buyers, which could reduce demand, leading to lower sales and potential job losses.

The moves have lead to concerns about economic fallout. But what do these new trade policies mean for you and your money? Here is everything you need to know.

Higher prices on everyday goods

One of the most immediate impacts of tariffs is higher consumer prices, and UK businesses that export to the US may need to raise prices to cover the cost of the new tariffs.

This could affect the price of cars, clothing, and even food products that rely on US imports, squeezing household budgets.

Companies may also choose to absorb some of the costs, which could lead to lower wages or fewer job opportunities in affected industries.

Job losses in the UK auto industry

A 25% tariff on UK car imports to the US could have severe repercussions for the UK automotive sector, with analysis from the Institute for Public Policy Research (IPPR) suggesting that as many as 25,000 jobs could be at risk.

Car manufacturers that rely on exports to the US may face a drop in demand, leading to production cuts and potential layoffs. This would not only affect factory workers but also suppliers and other related industries.

Increased costs for British businesses

Businesses that rely on US imports or operate within supply chains that export to the US will face higher costs.

The additional expense of tariffs may lead companies to pass costs onto consumers or cut jobs to maintain profitability.

Small businesses in particular could struggle to absorb these costs, potentially forcing some to shut down or rethink their business models. This could lead to reduced competition and fewer choices for consumers.

Financial market turbulence

Stock markets in London, Paris, and Berlin have already responded negatively to Trump’s measures, with sharp declines following the tariff announcement.

Market instability could impact investments, pensions, and savings, leading to reduced wealth for those with stock-based portfolios or retirement funds tied to market performance.

Investors may also shift their strategies, moving money into safer assets like gold or government bonds, which could further alter financial markets and affect long-term growth.

Potential trade war consequences

With China already vowing retaliation, and the EU considering countermeasures, a full-blown trade war could cause further economic disruption.

If global growth slows due to retaliatory tariffs, UK exports could suffer, and businesses reliant on international trade may struggle.

Higher barriers to trade could reduce economic efficiency and lead to prolonged economic uncertainty, affecting job security and overall consumer confidence.

Possible weakening of the British pound

Economic uncertainty and trade barriers could weaken the pound, increasing the cost of imported goods and overseas travel.

A weaker currency means reduced purchasing power for British consumers, affecting everything from holiday expenses to imported electronics and food.

Currency fluctuations could also impact businesses that rely on importing raw materials, leading to further price increases in everyday goods.

VAT scrutiny from the US

Trump has criticised the UK’s VAT rates, viewing them as barriers to American companies selling goods in Britain.

If trade negotiations lead to changes in VAT or new regulatory challenges, this could mean shifts in consumer pricing and business tax burdens.

A potential lowering of VAT to appease US trade demands could lead to short-term consumer benefits, but it may also result in government revenue losses, which could affect public services and infrastructure investments.

UK Government response and policy shifts

Prime Minister Sir Keir Starmer has acknowledged the economic impact of the tariffs but has vowed to respond with "cool and calm heads."

The Government had been lobbying to be spared the tariffs and hopes to strike an economic deal with the White House which will mitigate the impacts.

But Chancellor Rachel Reeves has said that the UK will not be "out of the woods", even if an economic deal can be struck with the US.

If the UK seeks to negotiate a trade agreement to mitigate tariff effects, policy shifts could impact businesses and consumers alike.

If the UK does decide to responds with its own tariffs, bringing in US goods could also become for importers. This could raise costs for businesses that rely on American products, potentially leading to higher prices for consumers.

And on a diplomatic level, any retaliatory measures from the UK could further strain international relations, making long-term economic planning more difficult for businesses and policymakers.

These sweeping tariffs could have a real impact on your wallet, from rising prices to job security and investment uncertainty. How do you think these trade policies will affect you? Are you worried about higher costs? Share your thoughts in the comments.