UK markets sold off sharply this week, with the FTSE 100 Index falling 3.5% to trade at 8,345 points at the time of writing.
Economists have warned that Donald Trump’s tariffs on global imports will dent the UK government’s fragile growth ambitions and hit key manufacturing sectors. The 10% levy imposed on the UK, while less than the 20% faced by the European Union, will weaken demand and disrupt supply chains at a time when businesses are already facing rising costs.
The UK economy has barely grown since the spring of last year, while the outlook for 2025 has worsened. Markets have already tweaked their expectations for what the tariffs mean for UK interest rates and the reduction in growth will probably make the Bank of England more likely to cut rates this year.
British farmers warn that a 10% tariff could impact the £2.5 billion agrifood and drink export market, with Scotch whisky exports alone facing potential losses of £200-£400 million. The US remains the UK’s second-largest food export market after the EU. Meanwhile, the UK’s struggling steel sector saw relief as no new tariffs were added to the existing 25% levy, but industry groups caution that indirect effects may arise if UK firms reduce production of finished goods.
The auto sector, which makes up 14% of UK steel demand and also faces a 25% US tariff, could be particularly exposed. Although Britain’s car industry is heavily reliant on European exports, around one in six of the cars shipped goes to the US, and it is the largest market for high-end brands such as JLR, Bentley and McLaren.
Some UK manufacturers see an upside as UK production has become 10% more competitive than the EU and even more so against low-cost countries. Business groups urge the government to continue trade negotiations, with Sir Keir Starmer suggesting tariffs could be eliminated.
Elsewhere, UK house prices stagnated between February and March, averaging £271,316 per Nationwide. Annual growth remained at 3.9%, reflecting market weakness as the stamp duty break ends. Economists had expected a 0.2% monthly rise and a 4.1% annual increase.
Commodity Markets
In the commodity markets, Brent crude futures traded around $68 per barrel on Friday and are set for a sharp fall this week, as eight key OPEC+ producers agreed to raise combined crude oil output by 411,00 barrels a day, speeding up the pace of their scheduled hikes.
Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria and Oman met virtually to review global market conditions and decided to raise collective output by 411,000 barrels per day starting in May. The group was widely expected to implement an increase of just under 140,000 barrels per day next month.
The eight OPEC+ producers started gradually unwinding 2.2 million barrels per day of voluntary cuts undertaken independently from the production strategy of the broader 22-member OPEC+ alliance, which has roughly 3.66 million barrels per day of separate cuts in place until the end of 2026.
The decision to raise output was taken against the backdrop of broader market turmoil trigged by sweeping tariffs on key trade partners unveiled on Wednesday by the administration of US president Donald Trump, who has been simultaneously championing higher US oil output. The new tariffs are stoking concerns over a global trade war that could weigh on oil demand.
Gold prices traded around $3,090 an ounce on Friday, retreating from all-time highs after a volatile week, as a broader market sell off weighed on bullion investors.
Equity Markets
US equity futures fell on Friday as fears mounted that President Donald Trump’s aggressive tariffs and potential retaliation from key trading partners could push the global economy into recession. In Thursday’s regular trading session, the Dow Jones Industrial Average lost 3.98%, the S&P 500 sank 4.84%, whilst the Nasdaq Composite plunged by 5.97%.
Donald Trump escalated trade tensions this week, announcing sweeping tariffs on US imports. Dubbed “liberation day,” the move imposes a 10% levy on nearly all imports starting April 5. The White House also introduced “reciprocal tariffs” on major trade partners. China, the world’s largest goods exporter, faces a total tariff of over 54% after Trump added a 34% duty to the existing 20% levies. The decision rattled financial markets and raised concerns about the global economy’s stability.
Trump’s tariffs will hit EU exports with rates up to 20% and Japan with 24%. He claims the move will fund tax cuts and boost US manufacturing, though both the EU and China are preparing countermeasures. Wall Street saw $2.5 trillion wiped from its value following the announcement, but Trump insists the tariffs will lead to a “booming economy” despite investor concerns.
The US dollar also weakened, seeing its gains wiped out since Trump’s election victory in November. Trump has argued that his tariffs will help restore American manufacturing, encourage investment, prevent other countries from “ripping off the US” and provide trillions of dollars of revenue to finance tax cuts.
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