Donald Trump has said tariffs imposed by the US on the European Union will “definitely happen” – and warned that the UK could be next.

The US president said Britain is “out of line” when it comes to trade but that he thought a deal could be “worked out” to avoid imposing tariffs.

“We’ll see how things work out. It might happen with them, but it will definitely happen with the European Union, I can tell you that,” he told reporters.

It comes after Trump initially announced at the weekend tariffs on Canada, Mexico and China over what he described as issues of illegal migration and drug smuggling. On Monday, Trump said he would pause the tariffs for a month following last-minute negotiations with the leaders of Canada and Mexico.

However, tariffs against China came into force overnight, prompting Beijing to retaliate with their own measures.

Having previously described tariffs as a “beautiful thing”, it should come as no surprise that Trump would impose substantial tariffs on trading partners, even if it does send shockwaves through the global economy.

But how could these measures affect British consumers? Even if direct tariffs against the UK are avoided, how could taxes imposed on goods from the EU affect the average supermarket shop?

What is a tariff?

A tariff is a tax imposed on foreign-made goods, paid by the importing business to its home country’s government.

They tend to be less popular with more advanced economies because they often lead to reduced trade, higher prices for consumers, and retaliation from abroad – for example, a tit-for-tat “trade war” of retaliatory tariffs.

While Trump has listed drug trafficking and illegal migration as reasons for tariffs on China, Canada and Mexico, he has also said he wants to reduce the US trade deficit and boost domestic manufacturing industries. He hopes this will in turn encourage Americans to buy more domestic products.

What could Trump’s tariffs mean for UK inflation?

On Saturday, Trump confirmed that Mexican and Canadian goods would be subject to a 25% tariff, while imports from China would be hit with a 10% levy.

However, in a statement posted to his Truth Social platform on Monday, Trump said he and Mexico’s president Sheinbaum agreed to hold off on imposing tariffs on each other after the Mexican leader agreed to send 10,000 soldiers to the border to help stop the flow of illicit fentanyl and illegal migrants. Trump and Trudeau worked out a similar deal.

Trump has not backed down on taxing Chinese imports, however, which are already expected to have a knock-on effect on the UK’s economy as it impacts the global trade system.

Last month the International Monetary Fund warned economic policies “are likely to push inflation higher in the near term”, and that a “new wave of tariffs” could lower global investment and disrupt supply chains.

Economist and CEO of the Avrio Institute Dr Shawn DuBravac told Yahoo News: “If financial markets anticipate higher inflation, that will lead to higher borrowing costs. And higher borrowing costs could and likely will impact every sector of the economy.

“Higher costs in one area could result in higher prices elsewhere so UK shoppers could see higher prices at the grocery store.”

Professor Guido Cozzi, chairman of Economics at the University of St Gallen in Switzerland, told Yahoo News that Trump’s tariffs could mean “increased costs for certain raw materials and goods that ultimately find their way to UK supermarkets”.

How will expected tariffs on the EU affect UK consumers?

As the UK’s biggest trading partner, any tariffs targeting European exports could “disrupt supply chains that UK businesses rely on”, warns Dr Danilo Spinola a senior lecturer in economics at Birmingham City University.

This could potentially increase costs for UK firms, particularly in the automotive, machinery, and agriculture industries, which could be passed onto British consumers, he says.

“Additionally, market uncertainty around trade policy could lead to fluctuations in the British pound, affecting consumer prices, particularly for imported goods,” Dr Spinola adds.

“The impact is even more extensive considering Brexit – as we in the UK can no longer rely on free access to the European market.”

Prof Cozzi says the situation could get “complicated” if European producers were to lose access to the US market due to tariffs, they might try to shift their excess stock to the UK.

“In the short term, this could mean lower prices on some goods. At the same time, if European exporters face higher costs when selling to the US, we may see some of those costs being passed through supply chains, making certain products more expensive in UK supermarkets,” he adds.

Trump’s bullish stance on the EU could also create problems for Keir Starmer, who is trying to strengthen economic relations with both the bloc as he meets EU leaders in Brussels today, and with the US.

Irina Surdu-Nardella, professor of international business and strategy at Warwick Business School, suggests he may have to “pick a side”.

“The reality is that the EU countries will still seek to sell to the UK consumer whose willingness to pay remains high compared to that of other European nations,” she told Yahoo News.

“In the meantime, it may prove that separation from the EU makes the UK better positioned to focus on strengthening trade relations with the US in the areas where the UK is most focused: defence and energy.”

What happens if Trump imposes tariffs on the UK?

Ministers have previously suggested the UK could avoid US tariffs because America does not have a trade deficit with Britain – however, Trump has not ruled out the possibility.

Recent analysis by the National Institute of Economic and Social Research (NIESR) warned that industries such as fishing, petroleum, mining and pharmaceuticals “may be particularly vulnerable to tariff changes”.

Assuming a 10% tariff was placed on Britain, the institute said UK exports could decline by as much as £22bn.

As lower US imports lead to a reduced supply of US dollars, investors rushing to buy up the currency could see Pound Sterling depreciate by 10-15%, the NIESR suggested, which in turn would drive up import prices and add to domestic inflation in the UK.

Higher prices of imported goods are likely to push up the prices of domestic substitutes in the UK, whose imports directly account for about a third of the country’s GDP, the institute adds.

If Trump imposes tariffs specifically on British goods, Prof Cozzi says: “British producers selling to the US would become less competitive. That could mean lower wages, job losses, and lost revenue.”

However, Prof Surdu-Nardella suggests that the impact on the UK would be “relatively reduced” and limited to industries like fishing and mining, as the “service-focused” nature of Britain’s economy, which mainly exports banking and consultancy services to the US, “shields it significantly”.

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