The introduction of broad tariffs by President Trump has unsettled global financial markets, leading to sharp falls in major indices.
While it may appear to be an issue largely concerning American businesses or multinational corporations, the consequences are likely to reach far into the UK’s economy.
Monday’s drop in the FTSE 100 (more than six per cent at the opening bell) was the worst since the early pandemic.
Every firm listed began the day in negative territory. Rolls-Royce shares tumbled 12 per cent, with banks such as Barclays and NatWest following suit with significant losses.
These figures, though dramatic, reveal only part of the story. The deeper issue lies in how these developments filter through the wider economy.
When large firms raise prices, others follow
A slump in a major manufacturer’s share price might not appear relevant to small businesses.
However, if a corporation chooses to recover its position through price increases, the consequences travel quickly through suppliers and partners.
Smaller manufacturers, logistics companies, maintenance providers, and service firms could all face new expenses.
These will eventually land with the businesses at the end of the supply chain and, ultimately, consumers.
Even if your company has no direct involvement with international trade, knock-on effects such as higher energy bills or supplier costs could start to appear.
Difficult choices for companies with US links
British firms that export to America are being forced into a balancing act.
With tariffs starting at ten per cent and increasing for some industries, companies must decide how to respond.
Raising prices in unaffected markets might seem like an option, but doing so risks losing ground to more competitively priced rivals.
Absorbing the tariffs may protect market share, but at the cost of already narrow margins.
In either case, businesses could find themselves shifting focus away from the US market in search of steadier returns elsewhere.
The impact on pensions and long-term savings
You don’t need to be in business to feel the effect.
Many people’s retirement savings are tied to global shares, especially within defined contribution pension schemes.
Sudden declines in share prices can lower pension fund values.
Although some of this may be offset by rising values in safer investments like Government bonds, prolonged uncertainty could disrupt long-term financial goals.
Investors may also grow more cautious, slowing overall growth in funds and delaying recovery in personal investment portfolios.
Potential trends to monitor
The next few months could bring several developments:
- Price increases across industries, affecting everything from machinery to maintenance contracts.
- Falling demand as global consumers and businesses reconsider spending plans.
- A more cautious financial environment, with higher borrowing costs and fewer funding opportunities.
Rethinking your strategy
Given the direction of recent events, businesses and individuals would be wise to take a closer look at their current position.
Reviewing supply chains, reassessing exposure to foreign markets, and updating financial strategies could make a significant difference.
If you are unsure where to begin or want to talk through potential risks, our experts are on hand to support you with advice tailored to your situation.