Donald Trump has denied reports that his incoming White House administration is considering limiting his proposed universal tariffs to cover only imports deemed critical to the United States, which briefly caused European markets to rally.
Trump’s denial led the pound to ease earlier gains — it had risen over 1 per cent — and it ended the day up 0.85 per cent. The FTSE 100 was 0.3 per cent higher at 8,249.66.
As a presidential candidate, Trump called for tariffs of between 10 per cent and 20 per cent on everything imported into the US.
According to The Washington Post, aides were considering focusing on imports in certain sectors deemed critical to national or economic security. These included the industrial supply chain — through tariffs on steel, iron, aluminium and copper — as well as critical medical supplies and energy production, though it was unclear whether other industries might also be subject to tariffs.
However, the president-elect said on his social media platform, Truth Social, that the article was “wrong” and that it “incorrectly states that my tariff policy will be pared back”.
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Economists believe tariffs would have a significant impact on the UK economy. In the aftermath of Trump’s election victory, Goldman Sachs cut its UK growth forecast from 1.6 per cent to 1.4 per cent for next year.
The National Institute of Economic and Social Research said that global tariffs of just 10 per cent would have a negative impact on the UK’s economy of 0.8 per cent next year, equivalent to a hit of £21.5 billion.
It said that the impact of global tariffs would be inflationary, pushing up prices by between two and three percentage points, while the Bank of England would be forced to keep interest rates higher. This in turn would push up the expected cost of government borrowing, damaging both public and private sector investment.
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European stocks rose further than those in the UK after the Washington Post article was released, given the higher proportion of manufacturing stocks in Germany’s Dax and France’s CAC 40, along with Europe’s comparatively higher reliance on goods exports to the US.
After Trump denied the story, gains eased but the euro still ended up higher against the dollar, with the Dax up by 1.6 per cent.