Marketing Newscast

(Edited 03 February 2025)

Trade wars: London stocks are tumbling this morning in response to US President Donald Trump’s executive order to impose 25% trade tariffs on Canada and Mexico ) and 10% tariffs on China, amid fears he could also hit the UK with higher import taxes. Earlier this morning, he told the BBC that he thinks the “UK is out of line” but added: “I'm sure that one, I think that one, can be worked out, Prime Minister Starmer has been very nice. We've had a couple of meetings, we've had numerous phone calls, we're getting along very well…” Nevertheless, at the time of writing, the FTSE 100 is down more than 116 points, registering a 1.34% fall, while the FTSE 250 has plunged even further, by 1.88%. The pound has also fallen 0.9% against the US dollar, dropping back below $1.23 in value. The Mexican peso and Canadian dollar have also fallen steeply; the latter falling more than 2% to its lowest level since 2003. The tariffs are an attempt by Trump to force all three countries to halt the flow of opiate drug fentanyl flowing into the US from China via Mexico and Canada, and stop illegal immigrants crossing into the US via the Canadian and Mexican borders. On X, the White House said: “Today’s tariff announcement is necessary to hold China, Mexico, and Canada accountable for their promises to halt the flood of poisonous drugs into the United States. There is growing production of fentanyl in Canada, and enough fentanyl was seized at the northern border last fiscal year to kill 9.8m Americans. Additionally, illegal border crossings from Canada reached historic new highs every year for the last four fiscal years.” “It is my duty as President to ensure the safety of all. I made a promise on my Campaign to stop the flood of illegal aliens and drugs from pouring across our Borders, and Americans overwhelmingly voted in favor (sic) of it,” Trump said.

All three countries impacted by Trump’s tariffs have threatened to retaliate. Canadian Prime Minister Justin Trudeau immediately levied 25% tariffs against $155bn worth of American goods – including alcohol, furniture and orange juice – and suggested Canadians should not holiday in the US “We don’t want to be here. We didn’t ask for this. But we will not back down,” Trudeau said on Saturday. The former Bank of England governor, Mark Carney, who is likely to replace Trudeau as leader of his Liberal party next month, ahead of a Spring election, said: “Canada will not bow down to a bully”. Meanwhile, retailers in Ontario and British Columbia began removing US alcohol from their shelves. Those under the control of the Liquor Control Board of Ontario (LCBO), Canada’s largest province, alone sell almost $1bn ($688m) worth of American wine, beer, and spirits each year. However, overall, more than 75% of Canada’s exports go to the US, according to government data, whereas only 17% of US exports go to Canada. Mexican President Claudia Sheinbaum, meanwhile, said she “categorically” rejected Trump’s insistence her government had an alliance with drug traffickers and provided “safe havens for the cartels to engage in the manufacturing and transportation of dangerous narcotics”. “If such an alliance exists anywhere, it is in the United States armouries that sell high-powered weapons to these criminal groups, as demonstrated by the United States Department of Justice itself in January of this year,” she said on a post on X. “Drug consumption and distribution is in their country and that is a public health problem that they have not addressed,” she added. China said it “firmly opposes” the USA’s “erroneous practices” and said it would file a lawsuit at the World Trade Organisation (WTO) to fight “the unilateral imposition of tariffs” that “seriously violates WTO rules”.

On his Truth Social media platform, Trump batted away criticism of his trade policy saying: “This will be the golden age of America! Will there be some pain? Yes, maybe (and maybe not!). But we will make America great again and it will be worth the price that must be paid. We are a country that is now being run with common sense and the results will be spectacular!!!”

The UK’s Foreign, Commonwealth & Development Office has so far declined to comment on the tariffs, as have Labour’s senior leaders. The EU, however, as it may well be next in the firing line, has responded. The European Commission said on Saturday it “regrets” Trump’s decision to impose blanket tariffs on Canada, Mexico and China. “Our trade and investment relationship with the U.S. is the biggest in the world. There is a lot at stake… Tariffs create unnecessary economic disruption and drive inflation. They are hurtful to all sides,” a spokesperson said, adding that the EU will “respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods.” On Friday, Trump opined from the White House: “Am I going to impose tariffs on the European Union? You want the truthful answer or shall I give you a political answer? Absolutely. The European Union has treated us so terribly.” On a timeline for EU tariffs, Trump said: "I wouldn't say there's a timeline, but it's going to be pretty soon."

Among the largest fallers on Europe’s stock markets today are car manufacturers, as their industry will be one hardest hit by US tariffs. Stellantis – which makes Chrysler, Citroen, Fiat, Jeep and Peugeot – saw its shares drop by as much as 6% on Friday, but eventually closed 2.88% down in New York. On the Frankfurt stock exchange this morning, VW has dropped 5.28%; Mercedes 4.05%, and BMW 3.05%. FTSE 100 listed drinks maker Diageo, which exports tequila from Mexico to the US, is also down 3.12%.

The BBC’s Business reporter Michael Race writes this morning that Germany is likely to be hardest hit by any hiked US trade tariffs: “Some 20 EU member states exported more to the US than they imported in 2023. According to Eurostat, the EU's statistics agency, the country with the largest surplus was Germany, followed by Italy and Ireland. This suggests, if tariffs were to be imposed on the EU, Germany – the EU’s largest economy – could be hit hardest. More than 30% of all the EU’s transatlantic goods exports were from Germany in 2023. Most of Germany’s exports were cars and machinery. Trump has repeatedly complained about the EU’s car exports to the US, with few vehicles being shipped the other way… The president also wants the EU to buy more of its oil and gas from the US. Since the EU has shifted away from Russian fossil fuels, the US became its largest supplier of liquefied natural gas (LNG)”.

The Bank of England is expected to cut interest rates this week when its Monetary Policy Committee meets on Thursday, likely by a quarter percentage point.

Labour is cutting back a £1bn project to tackle mobile signal “not-spots” in rural areas in an effort to slash costs, according to The Telegraph, which says officials are in discussions with Britain’s mobile network operators over the second phase of the Shared Rural Network (SRN), which is set to use £500m of public funding to improve patchy coverage in the most remote parts of the country, with an eye to reducing the number of new mobile masts to be built from 260 to just 60. It is not clear how much money such cuts would save, nor what impact they would have on coverage, the newspaper says.

AstraZeneca has cancelled plans to expand a vaccine manufacturing plant in Merseyside because, it says, the Labour government has failed to match the previous Conservative government’s offer of funding. According to the Financial Times (FT), the current government is offering a sum higher than £40m, but less than the £70m that was on offer in grants, as well as £20m in research and development support from the UK Health Security Agency, on offer under the Tories. “Several factors have influenced [our] decision including the timing and reduction of the final offer compared to the previous government’s proposal,” a spokesperson for the pharmaceutical giant said. The existing facility – which supplies the flu vaccine – will continue to operate and no jobs are at risk, the PA news agency reported.