Trump’s trade tariffs would threaten economic growth, Bank of England’s Lombardelli warns

Policymakers count cost of Trump tariffs

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

A day after Donald Trump announced plans for fresh tariffs on Canada, Mexico and China, policymakers around the world are digesting the consequences of “Tariff Man” Trump returning to the White House.

A deputy governor at the Bank of England, Clare Lombardelli, has warned that the president-elect’s proposed trade tariff would pose a risk to economic growth in countries including the UK.

Speaking to the Financial Times, Lombardelli explained that Trump’s trade policies could hit growth in the short term, while long-term productivity also suffers from increased trade frictions.

She says:

“I don’t want to speculate on the specifics but we know barriers to trade are not a good thing, whether they are tariffs or regulatory or others.

“Whether you are an economic historian, an economic theorist or a data-driven economist, the impact is clear in terms of its direction. In terms of its size, that depends on the circumstances.”

Trump rattled the financial markets yesterday by announcing he would impose 25% tariffs on Canada and Mexico, and an extra 10% on China, in a crackdown on immigration and drugs.

Trade experts fear that Trump could spark a global trade war, if other countries retaliate with their own tariffs in response.

Keith Rockwell, a former director at the World Trade Organization, explained:

“The United States exports hundreds of billions of dollars worth of goods to these countries. Anyone who expects that they will stand pat and not retaliate has not been paying attention.”

Trump’s proposed tariffs are likely to push up inflation in the US, as importers will pass the higher costs onto consumers – and possibly add a bit more on top!

But they could have a deflationary impact on other countries; China, for example, could reroute shipments to Europe rather than the US, cutting prices to support its sales.

They also pose a political dilemma for the UK – should it try to align with the US, to avoid being hit by tariffs too, or try to get closer to the EU?

Simon Sutcliffe, Customs & Excise Duty Partner at accountancy firm Blick Rothenberg, says the US hasn’t considered such a protectionist trade policy since the 1930s with the Smoot-Hawley Act – which ended up fuelling the Great Depression.

Sutcliffe says Sir Keir Starmer faces a dilemma:

One of the biggest stumbling blocks in the UK’s trading relationship with the EU is the control and administration surrounding the movement of food products. Moving closer to the EU may allow development of a consistent and streamlined food policy which would reduce trade red tape and extra charges.”

“However, aligning with the US would undermine that attempt, as the EU would be exceptionally resistant to allow US originating food products to ‘seep’ into its marketplace, resulting in the administrative burden on food movements being cemented in for longer.”

“But ‘Refusing’ the US may result in UK exporters being subject to US tariffs on their products. The US is the largest individual trading partner of the UK trading with roughly 30% of our total exports going to the US and the US exporting 10% of its goods to the UK, so any tariffs would have a big impact on UK trade.”

Also coming up today

We’ll get a full-body health check on the US economy today, with a flurry of economic data – from GDP to trade and jobless claims – being rushed out ahead of the Thanksgiving holiday tomorrow.

The agenda

9.30am GMT: GfK survey of German consumer confidence
Noon GMT: US weekly mortgage approvals data
1.30pm GMT: US Q3 GDP report (second reading)
1.30pm GMT: US durable goods orders for October
1.30pm GMT: US weekly jobless claims data
1.30pm GMT: US trade balance for October
3pm GMT: US PCE inflation measure for October

Key events

Trump’s tariffs will lead to higher prices in the shops, and weaker currencies for Canada, China and Mexico, explains Holger Schmieding, chief economist at Berenberg Bank.

Schmieding says

Taken at face value, such tariffs could raise the level of US consumer prices by c1% within a year if we assume that producers and distributors can pass on roughly 70% of higher import prices to consumers at a time of buoyant domestic demand. However, a depreciation of the Canadian, Mexican and Chinese currencies relative to the US dollar will likely absorb a significant part of that impact, perhaps up to half as a back-of-the envelope guess.

Trump’s tariff statement is probably merely the opening salvo of a series of tariff threats. But interestingly, he has tied his announcement of extra tariffs on the top three exporters to the US to specific complaints about immigration and drug trafficking. That seems to open the door for negotiations.

If the three countries do his bidding on immigration and drugs control to some extent, the tariffs may not be fully imposed or be partly rescinded again afterwards.

The Chinese yuan, Mexican peso and Canadian dollar all fell yesterday, with the latter hitting a four-year low against the US dollar.

Aston Marton shares drop after cash call

Photograph: Priyanshu Singh/Reuters

Shares in luxury car market Aston Marton have hit a two-year low in London this morning, after it tapped its investors for more cash.

Aston, which has been hit by softening demand in China, has raised £111m by issuing new shares worth 100p each – a near-8% discount to last night’s close of 107.9p.

It also raised £100m through new debt, and plans to use its new funds to invest in “future growth opportunities” and on its electrification strategy.

This morning, Aston’s shares have dropped as low as 98.1p, before recovering slightly to 102.4p (-5%).

Lawrence Stroll, executive chairman of Aston Martin, insists the company can deliver “long-term value” to shareholders, as it enters 2025 with “a stronger and more resilient balance sheet”.

But, shares are down roughly 97% since its stock market float in 2018….

Joanna Partridge

The London stock market has suffered another blow this morning, with the news that food delivery company Just Eat Takeaway is to delist.

Just Eat is also listed on the Amsterdam stock market, where the company is headquartered, and said the delisting resulted from restarting a review into where its shares should be listed.

Citing the “administrative burden, complexity and costs associated with the disclosure and regulatory requirements of maintaining the LSE listing” as its reasons for the decision, Just Eat said it was also because of low liquidity and trading volumes of its shares on the London market.

The French stock exchange, the Cac 40, has dropped to its lowest level since the market wobble of early August.

The Cac 40 is down 0.8% at a three-month low, led by bank stocks, and exporters such as Renault (-2.1%) and STMicroelectronics (-1.7%).

Back in the UK, the competition watchdog has reported that loyalty card pricing at UK supermarkets is not always the cheapest option for consumers.

In a new report, the Competition and Markets Authority (CMA) has found that loyalty prices do offer “genuine savings”; after analysing 50,000 loyalty-priced products, it found 92% offered savings on the usual price.

Customers can make savings of up to 25% by buying loyalty priced products, according to the CMA. But it stressed that while they offer “legitimate” discounts, supermarket customers could still find cheaper alternative options by shopping around.

George Lusty, interim executive director of consumer protection, explains:

“We know many people don’t trust loyalty card prices, which is why we did a deep dive to get to the bottom of whether supermarkets were treating shoppers fairly.

“After analysing tens of thousands of products, we found that almost all the loyalty prices reviewed offered genuine savings against the usual price – a fact we hope reassures shoppers throughout the UK.

“While these discounts are legitimate, our review has shown that loyalty prices aren’t always the cheapest option, so shopping around is still key.”

US tariffs would also have an impact on American consumers.

Economists at Deutsche Bank have calculated that if Trump’s threatened tariffs were fully implemented, US core PCE inflation for 2025 could increase from 2.6% to 3.7%.

Before Trump’s victory the assumption was for 2.3% inflation in 2025.

Share have rallied in China today, on hopes that Beijing may roll out new stimulus measures to protect its economy from Trump’s tariffs.

The CSI 300 index has rallied by 1.75%, while stocks in Shenzhen are up over 2%.

Vis Nayar, chief investment officer at Eastspring Investments in Singapore, explains:

“With the potential threat of tariff hikes in 2025, it’s likely China’s policymakers would come up with further stimulus packages to counter downward economic growth pressure from domestic cyclical weakness and increased external uncertainty.

There remains plenty of scope for China to surprise the markets.”

Budget airline easyJet has swelled its profits, despite the turmoil in the Middle East hitting demand.

EasyJet has reported a pre-tax profit of £602m for the year to 30 September, £170m than the previous year.

This earnings surge was driven by strong demand over the summer; easyJet had made a loss of £350m in the six months to 31 March, as conflict in the Middle East led to flight cancellations, extra costs and revenues.

Outgoing CEO Johan Lundgren, says:

“This strong performance – resulting in a 34% increase in our annual profits – reflects the effectiveness and execution of our strategy as well as continued popularity of our flights and holidays. It also represents a significant step towards our goal of sustainably generating over £1 billion annual profit before tax.

Profits were also lifted by charges for cabin bags and “leisure bundles”; last week, easyJet was one of five airlines fined in Spain for charging passengers for hand luggage and seat reservations….

Lighthizer protegé named as US trade representative

Overnight, Donald Trump has picked a protegé of Robert Lighthizer, his trade representative in the first Trump administration, to lead trade policy in Trump 2.0.

Jamieson Greer, an attorney, will serve as the next US trade representative, Trump announced ovenight, and will be tasked with reining in the trade deficit and opening up “export markets everywhere”.

Greer, 44, served as chief of staff to Lighthizer, who designed Trump’s original tariffs on some $370bn worth of Chinese imports, and also renegotiated the North American free trade deal with Canada and Mexico.

Lighthizer, an arch protectionist and sometime free-trade skeptic, blasted “globalists” and other ideological free-traders in his recent book, “No Trade Is Free”.

Kathleen Brooks, research director at XTB, says:

Trump has made more picks for his cabinet, including the trade representative, Jamieson Greer. He was a protégé of the tariff tzar in Trump’s first term as president, Robert Lighthizer, and he is seen as trade hawk. This suggests that tariffs will be at the heart of Trump’s trade agenda.

However, it is worth noting that as trade representative, Greer’s office will be overshadowed by the US Treasury. The new Treasury secretary, Scott Bessent, is moderate on tariffs, and has espoused free trade ideals in the past. This suggests that Trump’s tariff talk may be more bark than bite, although Greer’s appointment is a nod to the trade hawks in his team.