Has global trade been Trumped? The effects of the President's tariff bombshell

After months of speculation, US President Donald Trump has announced a raft of retaliatory trade tariffs on countries around the world. British exporters to the United States now face paying 10 per cent taxes on goods, while the European Union will pay 20 per cent.

The move has sparked panic on the FTSE and New York Stock Exchange, as well as markets and currencies across the world. Academics from Bayes Business School have been reacting to the news.

Trump tariffs a problem central banks “could do without”

Andrew Clare, Professor of Professor of Asset Management, said:

“Central bankers often spend considerable time trying to identify the sources of the shocks hitting their economies as they try to disentangle demand from supply shocks.  

“The imposition of tariffs is a clear supply shock. Although companies may be able to absorb some portion of the tariff increases, most of this shock will be passed onto consumers in the form of higher prices.

“This will then lead to a reduction in demand. The big question is: how will central banks, and in particular the Fed, respond to the likely rise in inflation? If they put rates up this will punish businesses and consumers further. If they do nothing, or even cut rates to stimulate demand, this could fuel further inflation.

“All in all, this is a problem that central banks could do without.”

Tariffs could give the UK a price advantage with US consumers

ManMohan Sodhi, Professor of Operations and Supply Chain Management, said:

“President Trump’s tariffs are a good thing for the UK.

“The UK has only a small tariff of 10 per cent on US goods being imported into the UK (if the White House numbers are to be believed) engendering a reverse 10 per cent Trump tariff on UK goods to be imported into the US.

“However, other countries have far more tariffs on US (and other countries’) goods being imported into their countries.

"The Trump tariffs, even at half the value of these, are much larger than tariffs on UK imports. It is unlikely the US can suddenly create production capacity to stop importing, so they will have to import, and lower tariffs on UK goods give the UK a price advantage with the US consumer.

“It may also encourage the EU to export to the US via the UK, which also helps the UK.

“However, the impending 25 per cent tariff on ‘all foreign made automobiles’ hurt the UK auto sector.”

Trouble ahead for port companies and staff, who “may have helped put Trump in charge”

Michael Tamvakis, Professor of Commodity Economics and Finance, said:

“The Trump administration’s tariffs target every nation in the world and are counter-productive for world trade.

Protectionist measures have not worked well in the past for anyone. The volume of global trade is likely to decrease overall and this should have a negative effect on freight rates, particularly in the container and dry bulk sectors.

"The tanker sector may go unscathed initially. The US remains a formidable exporter of crude oil, refined products and liquefied natural gas (LNG), especially towards the EU, so I doubt there will be retaliatory tariffs on energy products. However, the threat of world economic recession will ultimately take its toll on consumers and their ability to spend on energy.

“A reduction in global trade ultimately means less business: not just for shipping, but also the maritime communities, including ports, which shipping supports.

"If imports to the US are curtailed, this means less traffic to US ports and another fight to save ports and maritime workers. After all the investment in automation that many ports have undertaken, it will be difficult to maintain profitability with lower income due to reduced cargo flows.

“Add to this the proposed tax on Chinese-built vessels calling at US ports and the situation gets even worse – particularly blue-collar workers in ports (“longshoremen”) and companies which have invested in port infrastructure. Both of these groups may have helped put Trump in charge and will need to find ways to increase their resilience in the coming months, if not years.”

Global M&A put on hold due to retaliatory uncertainty

Dr Naaguesh Appadu, Research Fellow, said:

“President Donald Trump's recent implementation of broad tariffs is expected to significantly impact the global mergers and acquisitions landscape.

“These tariffs, combined with ongoing geopolitical uncertainty, are likely to weigh on global M&A activity in the short term. Deal advisors and corporate decision-makers may opt to delay transactions as they anticipate potential retaliatory measures from affected countries such as China and Canada.

“As a result, we can expect banks to reassess their risk exposure, and dealmakers may adopt a cautious, wait-and-see approach in response to this increasingly unpredictable environment.

“It could also affect small firms. If costs rise and profitability drops, small firms may become less attractive acquisition targets.

“Conversely, distressed firms may become more vulnerable to buyouts or consolidation at lower valuations.”