Although many expected the second Trump presidency to be eventful, few could have predicted the turmoil unleashed by Trump’s scatter-gun approach to international trade over the last few months. There’s no guarantee that the tariffs in place today won’t change next week, so experts are keeping a close eye on the evolving landscape to track any new announcements and their impact on the UK economy.
President Trump’s ‘Liberation Day’ tariffs, announced in early April, have affected investors across all financial markets to different degrees, and world leaders have responded to the action with varying levels of concern, with the Australian Prime Minister, Anthony Albanese, describing US tariffs as “adding uncertainty to the global economy”.
With US tariffs on the UK fluctuating several times in as many months, and affecting some industries more than others, we take a look at the UK investment ecosystem to gain clarity and help you take a more targeted approach to upcoming investment opportunities.
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What has happened with US tariffs?
On 2 April 2025, President Trump targeted several countries with tariffs, including Canada and Mexico. Shortly after, a baseline tariff of 10% was applied to most countries around the world, although some have had higher tariffs applied.
An initial tariff of 125% was handed out to China, prompting retaliatory measures on both sides until a temporary hold was agreed on 12 May 2025. A truce of sorts, this scenario is seen to be in flux, with reduced tariffs of 25% currently in place.
“The most recent twist in the tale is that the Court of International Trade ruled on 28 May 2025 that these tariffs are unlawful and exceed the President’s authority,” says Helena Powell, investment director at Evelyn Partners. “The administration is appealing the decision and tariffs remain in place for now.”
The US administration has said that a number of trade deals are currently being finalised but, to date, only the UK has managed to agree on terms. The good news is that financial markets are calming and adjusting to the ‘new normal’ of baseline US tariffs.
“Our view is that we seem to be in an uncertain space with the tariff turmoil markets have endured in 2025,” explains Tom Becket, co-CIO at Canaccord Wealth. “Investors are assuming that we will see a relatively benign resolution with tariffs being imposed at levels which are manageable for the global economy.”
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Are US tariffs impacting the UK economy?
Throughout the last decade, holding US dollar investments had been beneficial for British sterling investors. Now, the pound has strengthened against the dollar, as Powell explains, “UK investors in US assets have had a double whammy of falling share prices and currency going against them. Those who hedged the currency exposure will have done slightly better.”
After an initial sharp sell-off following the 2 April tariff announcement, the UK stock market has recovered. Historically, the US market has been more dominant in comparison to most world markets, drawing in a large portion of investor capital. However, some investors are now seeking alternatives, which has benefited the UK, among others.
Becket agrees, “From a markets perspective, we believe that investors should look forward with confidence. Equity markets outside of the US – such as the UK and Europe – have performed well this year. Plus, undemanding valuations and corporate earnings growth could lead to further gains.”
What’s the situation with UK inflation and interest rates?
Market insiders suggest that a key concern is around inflation and whether higher tariffs will lead to a renewed surge in prices. At the moment, there isn’t any evidence of this happening, but monitoring the emerging situation will clarify any changes in time.
“Our current forecasts still assume that UK interest rates will be cut another two times this year, with a reduction in the autumn and before Christmas,” says Becket. “Another rate cut next year will likely take UK interest rates to around 3%, which is where we believe they will settle.”
Property experts predict that this could be supportive for the UK housing market. There isn’t an expectation of extensive gain, but house prices are forecast to rise at levels around the official 3% annual inflation rate.
And what about inflation? With appearances suggesting there may still be a baseline 10% tariff for the UK, there could be pressure on inflation. Nonetheless, the stronger pound against the US dollar should have a deflationary effect, potentially absorbing some of the rise.
“In terms of interest rates, the Bank of England also has to take into account economic growth, which is pretty lacklustre in the UK,” clarifies Powell. “The impact of tariffs more generally is expected to weigh on the global economy, so we may see growth slow further.”
This leaves some wondering whether the deteriorating global growth outlook will outweigh the inflationary impact of tariffs and if UK interest rates could be cut in response.
What can investors do now?
As always, if you’re unsure on the best positioning for your investments now and in the future, seeking advice is the best way to bring clarity to your financial planning.
Powell advises investors to hold on, “Equity markets have been on a rollercoaster but profitable companies with strong balance sheets will be best placed to steer their way through, and there will be opportunities to buy stocks at more attractive valuations than even three months ago.”
The tumultuous record of US equities in recent months has revealed that sentiment can swing quickly and volatility could breed investor opportunity.
“As we have seen over the last month, the asset class that might benefit most from a resolution to the tariff turmoil could be US equities,” explains Becket. “We would urge investors to persist with a moderate overweight allocation in UK and European equities, at the expense of the US.”
Focusing on assets of quality that create the most certainty can help investors protect their interests through 2025. It may also be useful to consider any other currency exposures you have outside of the British Pound, as there is always the possibility of changeable returns.
