World leaders bickering, share prices dropping, companies fretting. On the other side of the Atlantic, President Trump’s vows to bring in tariffs for multiple countries exporting to the US – plus his stepping back from them at the last moment in some cases – has plenty of people wondering what it might mean on these shores.
UK companies won’t be exempt from the possible carnage, though of course who and how they will be affected will depend on their types of business: those who export to the US could face higher charges immediately, while those who buy in parts or raw materials might also be concerned if the UK takes China’s route and opts for retaliatory tariffs, too.
That’s still far from certain, of course, with the UK and the EU not the first areas in Donald Trump’s sights.
But that doesn’t mean UK companies aren’t immediately impacted. Take Diageo, for example.
If you don’t habitually scan investment markets you might not know that company name, but you almost certainly will know their brands: Johnnie Walker whisky, Gordon’s gin, Smirnoff vodka, Guinness. It owns them all and plenty more, and sells them all over the world – and believes it would take a $200m (£160m) hit to operating profits if tariffs come into force.
Chief financial officer Nik Jhangiani suggested the company might be able to cover “about 40 per cent” of that hit, before needing to take action with regards to prices, per the Financial Times.
A vast majority (85 per cent) of that £160m figure comes from their tequila brands – which, of course, originate from Mexico and head into the US, a trade route which is facing a 25 per cent tariff. It has been delayed, which adds to the uncertainty, and Diageo as a result have announced the removal of their guidance for sales growth – a key figure investors and would-be investors look towards.
Russ Mould, investment director at AJ Bell, said: “[Diageo are] one of the first companies to move beyond vaguely discussing the threat posed by US tariffs to actively talking about the impact and how it will attempt to mitigate it.
“Diageo imports from Mexico and Canada account for a good chunk of its US sales so it will be relieved to see the imposition of tariffs for these two countries delayed for now. If tariffs are eventually imposed then it will be a test of Diageo’s pricing power to pass on these extra costs to consumers.“
How can it mitigate that expense? Moving inventory before tariffs come into force is one option. Finding alternative routes into the US may be another, yet could prove equally impactful. Ultimately, absorbing the cost and passing it on in the products themselves is often the way it goes, meaning higher prices, meaning inflation in some areas at least.
Naturally, any other companies which export from tariff-hit countries into the States will face similar issues, with direct UK-US exports affected if Trump places a tariff here.
Data from the ONS says medicinal and pharmaceutical products made up the highest volume along that route in 2023, worth £8.8bn. Cars (£6.4bn), mechanical power generators (£5.2bn) and organic chemicals (£2.8bn) were also big contributors.
On the retail side, JD Sports and Primark are two examples that have growing sales Stateside and may be affected. JD Sports said last year it expected US sales to represent 45 per cent of revenue by the end of 2025 – that number could fall if US shoppers face a consumer confidence hit, or the profit margins could be impacted if sales stay the same but tariff costs arise.
But it’s not just about the direct increase in costs for goods arriving Stateside.
Anglo American is the 24th-largest company on the London Stock Exchange, by market capitalisation. Chief executive Duncan Wanblad was vague over the material impact, but blunt on that there would be one. “I have no idea what to make of the [Trump] statement, other than we could have all done without it,” he said, per the FT.
“One thing I’m sure of is that under all circumstances, [tariffs] are going to be inflationary,” he said. “We are going to see the cost of production go up pretty much everywhere as a result of this.”
The FT further reports that CEOs from other mining companies are “assessing” information over tariffs but that Wanblad’s views “echo” their thoughts.
Further knock-on effects can come with UK companies who do business within the EU: if growth there slows, purchases here can slow too.
Economist Julian Jessop similarly wrote on X (Twitter) that any immediate change to the UK economy would be small if no direct tariffs were imposed, but that German or other nations’ economies facing a downturn could certainly have an impact – while if the Federal Reserve didn’t cut interest rates in the US, borrowing costs in the UK could remain “higher for longer” too.
Finally, there’s the chance that in a worst-case scenario tariffs-wise – in other words, if they are fully implemented, retaliatory and too expensive for businesses and countries to want to deal with – workarounds in the supply chain need to be found.
While there could be opportunities arising there, it also tends to be a time-consuming and costly challenge to navigate, both when trying to send materials and goods by different routes and, importantly, trying to bring them in via new avenues without disrupting inventory and costs too much.
