020 7898 0500Following US president Donald Trump’s announcement of a global tariff package on Wednesday evening, the dollar weakened against the pound and euro. USD is currently down 1.4% against both GBP and EUR.
The president’s announcement came after weeks of threats and it is worse than many analysts feared. 10% tariffs will be applied to all US imports as standard and further “reciprocal” tariffs will be applied on a per country basis, ranging from 10 – 50%.
The immediate impact has seen global stock market sell offs as traders look for safer places to store their mofney. Gold prices hit another all-time high, at one point selling for $3,167.57 per ounce, and the pound reached $1.31 as the dollar weakened.
For the UK, that additional levy is comparatively light at only 10%. However, it is still likely to see the UK’s growth forecast downgraded. Just last week, in the Spring Statement, Chancellor Rachel Reeves cut billions in welfare benefits to maintain the government’s £10bn of fiscal headroom and that could be wiped out by a reduction in US exports.
The UK government previously ruled out retaliatory tariffs, aiming instead for a trade deal that would see the country exempt from Trump’s tariffs. That deal has so far not materialised, but analysts hope the UK is at the front of the queue.
Europe has been hit with an additional 20% tariff on all its exports to the US. There was an additional dose of pain for Germany as on top of the 10% standard tariff and 20% retaliatory tariff, there is a an additional 25% on automobile imports. The EU has said it will apply a package of tariffs on US exports in retaliation.
Currently, like sterling, the euro is climbing against the dollar as traders look for safer markets for their money but, according to European Commission president Ursula von der Leyen, the global economy “will massively suffer”.
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GBP: Least bad of a bad hand
Sterling’s climbed 1.4% against the dollar, reaching $1.31 for the first time since October. However, the impact of the 10% tariff and additional 10% retaliatory tariff will likely see UK growth downgraded.
GBP/USD past year
EUR: A triple hit for Germany
While the euro is 1.4% up against the dollar, there are tough times ahead for the eurozone. On top of the 10% global tariff and 20% retaliatory tariff, a 25% increase in automotive imports will hit Germany particularly hard.
EUR/USD past year
USD: Dollar weakens on ‘Liberation day’
The dollar weakened in the face of euro and sterling, losing 1.4% against both currencies. Traders abandoned stocks in favour of safer harbours, such as gold, as they await to see the impact of Trump’s widespread tariffs.
USD/GBP past year
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