iPhones, prices and Brexit: Your questions about tariffs answered

Reader Question from Mike Heafield, Preston: What will be the repercussions for products, such as iPhones, produced in China by American corporations?

The announcement of these tariffs has immediately affected major US companies, notably Apple, whose stock value experienced a 7% decrease. This decline reflects concerns over Apple’s extensive manufacturing operations in nations heavily targeted by the new policy, especially China, which now faces tariffs as high as 54%, and Vietnam at 46%.

During his previous term, President Trump granted tariff exemptions to Apple in 2019. Company executives are likely seeking similar exemptions this time. Citi, the global investment bank, suggests that if exemptions are not granted and Apple absorbs the 54% Chinese tariffs, the company could see approximately a 9% reduction in its overall gross profit margin.

Earlier this year, Apple pledged to invest over $500 billion in the US within four years. President Trump previously asserted that Apple’s commitment to domestic manufacturing was partly a result of his administration’s trade policies, including tariffs.

Reader Question from Paul Miller, Devon: How will these tariffs affect US consumers, and could the UK potentially benefit?

American consumers are expected to bear the brunt of this trade dispute, potentially facing increased prices and reduced product choices, despite presidential assurances. This situation may incentivize producers to explore and capitalize on alternative markets.

During President Trump’s initial term, nations like Vietnam and Malaysia leveraged the tariffs imposed on China to boost their exports to the US. Ironically, these countries are now also subject to increased tariffs, pushing them to seek expanded trade with nations like the UK – potentially benefiting UK consumers but increasing competition for domestic businesses.

Many producers are already diversifying beyond traditional markets, for example, whisky producers targeting Asia. This trend is likely to intensify. Trump’s policy shift could lead to a significant reshaping of global trade routes and, consequently, consumer purchasing habits.

Reader Question from Jock Scott, Nuneaton: Will the US tariffs impact the cost of living in the UK?

The precise effects of these tariffs remain uncertain. Under certain scenarios, UK prices could rise, while in others, they might decrease.

The tariffs announced by President Trump will initially be paid by US businesses importing goods, suggesting that initial price increases will primarily affect American consumers if companies pass on these added expenses. However, some economists propose that the tariffs could strengthen the dollar against other currencies. If the pound weakens relative to the dollar, UK firms importing US goods will encounter higher costs, potentially leading to increased prices for consumers in British stores if businesses cannot absorb these costs.

Furthermore, if the UK government decides to retaliate with its own tariffs on US imports, UK consumer prices could also rise if domestic businesses transfer these additional costs to consumers.

Conversely, some economists suggest that prices could potentially fall. Economist Swati Dhingra from the Bank of England’s monetary policy committee has indicated that businesses that typically export to the US might redirect their goods to countries with lower tariffs, such as the UK. This shift could result in a surge of cheaper goods in the UK market.

Reader Question from Robert Jones, Cardiff: What will be the impact of these tariffs on our pension investments?

There is little doubt that President Trump’s tariff announcement has triggered immediate volatility in stock markets and is expected to have lasting economic repercussions.

Many individuals have already observed declines in their pension investment values, creating uncertainty for millions with investments. Financial experts emphasize that market volatility is inherent to investing. Long-term investment strategies are crucial, and hasty reactions should be avoided.

However, for those nearing retirement and planning to access their investments soon, this situation may cause concern. It’s worth noting that most pension funds are typically shifted to lower-risk assets like cash or bonds as individuals approach retirement. State pensions remain unaffected by these market fluctuations.

Reader Question from Paul Naldrett, Windsor: Does the UK’s position outside the European Union present a trading advantage given the EU is facing 20% tariffs?

Some analysts suggest a potential “Brexit benefit,” as the UK faces a 10% tariff rate compared to the 20% imposed on the EU. This disparity could lessen the economic strain on British enterprises relative to their European counterparts and potentially create new trade opportunities.

UK exporters to the US might gain a competitive advantage since US importers would incur half the tariff by trading with UK businesses instead of EU businesses. British companies, and consequently consumers, could also benefit from an influx of more affordable goods diverted from the US market if the tariff costs prove prohibitive.

However, concerns exist regarding the potential repercussions for domestic industries if a wave of cheaper imports, possibly with lower production standards, floods the UK market.