Trump’s tariffs hit, but where do you stand as Autumn Budget looms

In summary

• US President Donald Trump has introduced the promised new tariffs on more than 90 countries around the world
• A severe 50% tariff hit on Brazil and India is due to take effect, with India threatened due to buying Russian oil
• EU struck a deal for a ceiling of 15% tariffs on goods, UK at 10% on top of pre-April rates, but Switzerland's 39% additional tariffs are expected to critically hit its economy
• With the UK Budget just months away, these tariffs are expected to have a knock-on effect on UK spending and taxes 

The news comes after many nations desperately tried to strike deals to reduce or avoid the scheduled tariffs. They included the UK, where negotiations resulted in a blanket 10% tariff being implemented on top of pre-April rates.

With the objective of reshaping the global trading system and bringing in billions of dollars into the US, the President’s self-proclaimed “reciprocal tariffs” have shaken up the economy and raised concern across the world.

On the 2 April 2025, the so-called “Liberation Day" as infamously coined by the President, saw him sign Executive Orders 14256 and 14257. These saw the introduction of widespread new tariffs on nations exporting goods to the US. Consequently, global markets crashed, and the White House delayed the introduction of the tariffs for 90 days for negotiations with countries.

Talks with the UK Prime Minister on 8 May provided some respite, despite uncertainty. The headline news was a 10% additional baseline tariff applied to UK goods destined for the US. While this limited damage to the UK, many nations have been struck substantially harder by Trump’s tariffs.

India and Brazil’s 50% rate have raised many eyebrows. The reason behind India’s large figure was down to the subcontinent continuing buying heavily discounted Russian crude oil, indirectly contributing to financing Russia’s war on Ukraine. Brazil’s, meanwhile, felt more political retaliation than economic manoeuvre with Brazil’s President Luiz Inacio Lula da Silva prosecuting the nation’s former president, and Trump ally, Bolsonaro. Lula has since requested immediate consultations with the World Trade Organisation (WTO) to negotiate a much-improved deal.

Among European nations, Switzerland’s staggering 39% additional tariffs is expected to stifle the economy, while Italy (part of the blanket 15% tariff rate on EU member countries) could see its GDP fall by 0.2%, hitting the agricultural, pharmaceutical and automotive sectors.

A major point of focus around the tariffs has been the technology sector, with Trump threatening a 100% tariff on foreign imported semiconductor chips. China is said to be the main reason for this, as he pressures tech firms to invest in the US. Notably, Apple announced a new $100bn investment deal after pressure from the White House to move more production to the States.

As well as technology, the pharmaceutical industry is also expected to bear the brunt of the President’s trade agreements. Speaking to CNBC, Trump stated, “We’ll be putting an initially small tariff on pharmaceuticals, but in one year – one and a half years, maximum – it’s going to go to 150% and then it’s going to go to 250%, because we want pharmaceuticals made in our country.”

This resulted in European pharmaceutical companies’ shares hitting a four-month low as the threat of colossal levies wreaked havoc. Initially, Under the EU-US trade agreement, a 15% levy will be imposed on medicines imported from the EU. The move has been strongly criticised by the EFPIA as a “blunt instrument" that risks undermining patient care on both sides of the Atlantic.

For businesses operating in the UK, speculation has focussed on how Trump’s tariffs on the UK will impact trade. The UK and US share £300bn of trade every year. With neighbouring EU member states subject to a 15% tariff rate, it could mean UK products become more competitive in US markets over EU exports.

Likewise, UK businesses could experience a diversionary effect, as surplus goods from exporters previously focused on the US market are redirected—potentially driving down prices and reshaping competitive dynamics.

Hours after Trump’s tariffs came into force, the economy was given a boost from the Bank of England reducing the interest rate down to 4%. Down 0.25% from 4.25%, the drop represents the fifth since August last year, welcome news for borrowers.

However, in the Bank’s Monetary Policy Report inflation is expected to peak at 4% in September, above the 3.8% rate it predicted in May and twice the target rate. Meanwhile, many analysts predict food price inflation to climb to 5.5% this year, fuelled by a combination of poor harvests, costly new packaging regulations and rising employment expenses linked to measures announced in the 2024 Autumn Budget.

This news, coupled with Trump’s tariffs taking effect, will likely influence the Chancellor’s decision-making going into the 2025 Autumn Budget. Already, a hike in gambling levies—championed by former Prime Minister Gordon Brown—is reportedly a certainty.  With the Chancellor, and Labour’s manifesto pledge, promising not to raise taxes “on working people”, there’s a worrying possibility that businesses will again bear the burden of the Chancellor’s announcements in the Autumn.