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The infoshot to help kick-start your week

Tariffs trending upwards as initiation date creeps closer

On Thursday, the FTSE-100 hit a record high and had the 9,000-point mark in its sights as traders became optimistic that Trump would reach agreements with trade partners or roll back some of his threatened tariffs.

However, this optimism was steadily crushed over the next few days.

First up, came Trump’s announcement that he’ll impose a 50% tariff on Brazil. Latin America’s largest country has the third-biggest trade surplus in the world with the US ($28.6bn in 2024 with goods and services combined) and had been set to pay the minimum 10% tariff.

Trump’s new tariff is a retaliation to the charges that his friend, the former Brazilian president, Jair Bolsonaro is facing. Bolsonaro is currently on trial for allegedly leading an attempted coup to overturn his 2022 election defeat. He denies leading a coup plot but has admitted to discussing ‘alternative ways’ to remain president. The current Brazilian president, Luiz Inacio Lula da Silva, has labelled the new tariff an attack on Brazilian sovereignty and threatened to impose a 50% tariff on US goods in response.

This was followed by a threat by Trump to impose a 30% tariff on the EU. The President of the European Commission, Ursula von der Leyen, said the EU will adopt “proportionate countermeasures” if they can’t reach a deal by the 1 August deadline.

More high tariff rates were also announced this weekend. US’s neighbours Canada and Mexico are now set for 35% and 30% tariffs unless they help “stop the scrouge of fentanyl”, and in Canada’s case encourage, “more firms to build or manufacture products in the US.” Earlier in the week, key Asian trading partners, Japan and South Korea, were both told they would be charged a 25% tariff rate.

UK rate cut looks more likely as GDP and jobs fall

A rate cut in August by the Bank of England (BoE) is looking more likely following last week’s GDP numbers and the slowing UK jobs market.

The UK economy shrank for the second month running, contracting 0.1% in May according to the latest data from the Office for National Statistics (ONS). Weaker than the 0.1% expected growth, the contraction was caused by a 0.9% drop in industrial production and 0.6% in construction work. The pound fell against the dollar in response, but the ONS did point out that the economy still grew over the March-May quarter in part thanks to a growth in services.

The BoE’s governor, Andrew Bailey, said in an interview with The Times this morning, that he’s prepared to make larger interest rate cuts if the job market continues to show signs of declining. He said businesses were “adjusting employment and hours” and giving smaller pay rises following the Chancellor, Rachel Reeves’ increase in employer National Insurance Contributions (NIC). HMRC data shows that 276,000 jobs have been lost since Reeves’ Autumn budget, taking the number of vacancies below the first covid pandemic lockdown in March 2020.

The impact of AI on the workplace is likely compounding the effect of higher employer NICs on the UK job market. Graduate jobs are down 33% on last year (their lowest level since 2018) as more and more employers are automating away or passing on to AI many entry level tasks. On Sunday, the Chief Executive of BT, Allison Kirkby, said AI could enable the company to make deeper job cuts as they continue their plan to cut up to 55,000 jobs by 2030.