Threat of US trade war drives UK consumer confidence down to record low
The threat of a US trade war has driven UK consumer confidence down to its lowest level on record, the British Retail Consortium reports today.
Its latest healthcheck on shoppers found that people were much more negative about the state of the UK economy, and of their own financial situation.
The survey was conducted between the 4th and the 7th April, which covers the period immediately after Donald Trump announced new tariffs on US trading partners.
It rather bolsters Andrew Bailey’s warning that the US trade war will hurt UK growth (see opening post).
Helen Dickinson, chief executive of the British Retail Consortium, says:
“With fieldwork completed just days after Donald Trump’s “Liberation Day” tariffs, it is unsurprising that consumer expectations for the economy plummeted to a record low. The original tariff schedule, since reduced for most countries, was expected to reduce growth in the UK and elsewhere. Yet despite this economic pessimism, expectations of retail spending rose slightly as the prospect of Easter shopping drew closer.
Here’s the details:
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The state of the economy dropped significantly to -48 in April, down from -35 in March.
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Their personal financial situation worsened to -16 in April, down from -10 in March.
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Their personal spending on retail rose to +3 in April, up from 0 in March.
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Their personal spending overall fell slightly to +10 in April, down from +11 in March.
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Their personal saving rose slightly to -4 in April, up from -5 in March.
The survey does not catch the reaction to Trump’s decision on 9 April to pause most tariffs for 90 days.
Dickinson warns, though, that confidence is still weak despite that u-turn:
“Even with a pause on many of the US tariffs, business and consumer confidence remains fragile. The risk of higher global prices is an unwanted addition to the £7bn in new costs hitting retailers this year from higher employer National Insurance, increased NLW, and a new packaging tax.
Many retailers are also concerned about the risk of cheap Chinese products being diverted from the US to other destinations, including the UK.
Key events
PepsiCo no longer sees profit growth in 2025 as tariffs lift supply-chain costs
Just in: Soft drinks and snacks group PepsiCo has abandoned hopes of growing its earnings this year, as new tariffs drive up its costs.
In its latest financial results, PepsiCo told shareholders is now expects its core earnings per share to be “approximately even” this year, compared with 2024.
It had previously expected mid-single-digit growth.
Chairman and CEO Ramon Laguarta says PepsiCo are actively planning mitigation actions to address higher supply chain costs.
Laguarta explains:
“Our businesses remained resilient in the midst of increasingly dynamic and complex geopolitical and macroeconomic conditions in the first quarter.
As we look ahead, we expect more volatility and uncertainty, particularly related to global trade developments, which we expect will increase our supply chain costs. At the same time, consumer conditions in many markets remain subdued and similarly have an uncertain outlook.”
UK companies have been hit by a drop in export orders this month, as the Trump tariffs depress global trade.
The CBI’s latest monthly balance for export orders sank to -41 this month from -29 in March. That’s the weakest since December 2020 with the exception of November 2024, and shows that more companies reported a drop in export orders.
Ben Jones, lead economist at the CBI, says:
“The recent downturn in manufacturing output appears to have eased, but manufacturers still seem gloomy about their prospects amid rising costs, an expected decline in new orders and heighted uncertainty around global economic conditions.
“The combination of financial pressures, market instability and falling confidence is leading manufacturers to cut back employment and investment, with plans for spending on buildings, equipment, innovation and training all taking a hit.
“The wider geopolitical environment is becoming increasingly challenging for exporters, with export optimism falling sharply for a second successive quarter and export order volumes now hovering around post-pandemic lows.
“The government is right to make the case for global free trade, with the Chancellor in Washington this week at the IMF spring meeting reaffirming that commitment. The uncertainty around global economic conditions only increases the importance of getting it right in domestic economic policy.
Wall Street is on track to drop when trading resumes in New York.
The Dow Jones industrial average is expected to drop by 0.7%, or around 250 points, according to the futures markets. Similar-sized losses are expected on the S&P 500 and the Nasdaq.
There’s anxiety after Donald Trump indicated last night that his administration could reimpose tariffs it paused on 9 April within “the next two, three weeks” if countries haven’t struck a deal – rather than maintaining the current 90-day pause.
Speaking at the White House, the US president said:
“In the end, I think what’s going to happen is, we’re going to have a great deals, and by the way, if we don’t have a deal with a company or a country, we’re going to set the tariff. I’d say over the next couple of weeks, wouldn’t you say? I think so. Over the next two, three weeks.”
Our US Politics Live blog has full details:
China calls on US to remove all unilateral tariffs
China has picked up the olive branch proffered by Donald Trump earlier this week, and bashed the US president with it.
He Yadong, the Chinese Ministry of Commerce’s spokesman, has told reporters today that the US should revoke all the unilateral tariffs recently imposed, and also insisted there has not been any progress towards a trade deal.
He told a press briefing:
“The US should respond to rational voices in the international community and within its own borders and thoroughly remove all unilateral tariffs imposed on China, if it really wants to solve the problem.”
Reminder: on Tuesday, Trump said high tariffs on goods from China will “come down substantially.
He, though, has dismissed speculation that progress has been made in bilateral communications, saying “any reports on development in talks are groundless.”
Deutsche Bank warns of ‘structural dollar downtrend’
The US dollar is weakening today, down around 0.5% against a basket of currencies, wiping out some of yesterday’s gains.
The euro has climbed 0.7% to $1.1383, towards the three-year highs of $1.15 set at the start of this week.
Deutsche Bank has revamped its medium-term FX forecasts yesterday, and are now predicting a “structural dollar downtrend.”
George Saravelos, global head of FX research at Deutsche Bank, gives a four-point explaination:
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What has changed since the start of the year? The list of superlatives is long – the largest shift in US trade policy in a century; the biggest pivot in German fiscal policy since re-unification; the most significant reassessment of US geopolitical leadership since World War II, to name a few.
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Our view on all these factors is that the pre-conditions are now in place for the beginning of a major dollar downtrend. Our forecasts foresee the end of a “higher for longer” dollar with EUR/USD appreciating closer to purchasing power parity of 1.30 over the remainder of the decade.
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At the core of the dollar bear market are three assessments: a reduced desire by the rest of the world to fund growing twin deficits in the US; by extension, a peak and gradual unwind in elevated US asset holdings ; and a greater willingness to deploy domestic fiscal space to support growth and consumption outside of the US.
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In a world of extreme uncertainty and rapidly shifting policy norms, the risk of market dislocations and regime breaks remains high.
The stock market turmoil triggered by Donald Trump’s tariff announcements also hurt the world’s largest sovereign wealth fund.
Norway’s wealth fund posted a near-$40bn loss for the first quarter of this year, a return of -0.6% (or -415bn kroner), caused by losses on its tech stock investements.
The fund’s manager, Nicolai Tangen, said the quarter has been characterized by “large fluctuations in the market”, adding:
Equity investments yielded negative returns, and it was mainly technology stocks that dragged down the result.
Growth across the eurozone is likely to peter out in the second half of this year, Goldman Schs has predicted.
Goldman analysts say they expect euro area growth to slow further, with flat GDP in the second half of 2025, telling clients:
First, the ongoing trade tensions are likely to weigh materially on activity via weaker net trade and investment, despite President Trump’s 90-day pause on the country-specific reciprocal tariffs.
Second, we expect weaker global growth to weigh on exports, given recent downgrades by our US and China teams.
Third, financial conditions—with our Euro area FCI [financial conditions index] 50bp tighter since early March—point to a building headwind.
Goldman predict eurozone growth of 0.7% in 2025 and 1% in 2026, which they add is “notably” below consensus, the ECB March staff projections and the latest IMF forecasts.
Donald Trump’s tariffs will make it harder for Sir Jim Ratcliffe’s car division, Ineos Automotive, to reach its first profit.
Ineos Automotive’s CEO, Lynn Calder, told Bloomberg that the US president’s 25% tariff on foreign cars will make it harder to hit the earnings target.
Calder said:
“For sure, this last week has put a dent in that and, for sure, delayed it,”
Calder insisted, though, that Ratcliffe is still “absolutely, 100%” committed to cars, adding:
“We’re stubborn as mules. We’re not easy to knock down.”
Threat of US trade war drives UK consumer confidence down to record low
The threat of a US trade war has driven UK consumer confidence down to its lowest level on record, the British Retail Consortium reports today.
Its latest healthcheck on shoppers found that people were much more negative about the state of the UK economy, and of their own financial situation.
The survey was conducted between the 4th and the 7th April, which covers the period immediately after Donald Trump announced new tariffs on US trading partners.
It rather bolsters Andrew Bailey’s warning that the US trade war will hurt UK growth (see opening post).
Helen Dickinson, chief executive of the British Retail Consortium, says:
“With fieldwork completed just days after Donald Trump’s “Liberation Day” tariffs, it is unsurprising that consumer expectations for the economy plummeted to a record low. The original tariff schedule, since reduced for most countries, was expected to reduce growth in the UK and elsewhere. Yet despite this economic pessimism, expectations of retail spending rose slightly as the prospect of Easter shopping drew closer.
Here’s the details:
-
The state of the economy dropped significantly to -48 in April, down from -35 in March.
-
Their personal financial situation worsened to -16 in April, down from -10 in March.
-
Their personal spending on retail rose to +3 in April, up from 0 in March.
-
Their personal spending overall fell slightly to +10 in April, down from +11 in March.
-
Their personal saving rose slightly to -4 in April, up from -5 in March.
The survey does not catch the reaction to Trump’s decision on 9 April to pause most tariffs for 90 days.
Dickinson warns, though, that confidence is still weak despite that u-turn:
“Even with a pause on many of the US tariffs, business and consumer confidence remains fragile. The risk of higher global prices is an unwanted addition to the £7bn in new costs hitting retailers this year from higher employer National Insurance, increased NLW, and a new packaging tax.
Many retailers are also concerned about the risk of cheap Chinese products being diverted from the US to other destinations, including the UK.
The London stock market has opened to little fanfare.
After rallying yesterday to a near three-week high, the FTSE 100 has risen by just 2 points (or 0.03%) to 8405 points.
UK brokerage AJ Bell has benefitted from recent market turbulence.
It reports that there has been increased trading activity in April as customers respond to “changing market dynamics”, typically by snapping up shares whose values fell.
AJ Bell told the City:
The long-term investment outlook among customers is illustrated by the fact more than three-quarters of these trades were buys with the net investment totalling more than £300 million.
Unilever, Domino’s and Senior see limited hit from tariffs
Several UK-listed companies are telling investors this morning that they don’t expect major damage from the US’s new trade war.
Unilever, the consumer goods giant, told the City that it expects a “limited and manageable” hit to its earnings from tariffs.
Unilever, which owns Marmite, Dove and several ice cream brands, said it was sticking to its targets for 2025, but added:
The direct impact of tariffs on our profitability is expected to be limited and manageable.
All this being said, we are conscious that the macroeconomic environment, currency stability and consumer sentiment remain uncertain and we will be agile in adjusting our plans as necessary.
Pizza maker Domino’s told shareholders that its initial assessment of newly introduced tariffs shows “minimal direct impact”, adding:
We continue to assess any indirect impacts on our supply chain, monitor the broader environment going forward and our full year expectations remain unchanged.”
Engineering firm Senior, which makes high technology components and systems, is taking a similar line. It told investors this morning:
The direct impact of announced tariffs is limited and manageable. We remain mindful of the potential broader macroeconomic impact on the market sectors in which we operate and will continue to monitor the situation and respond appropriately.
Jupiter: Some investors are looking to reallocate away from the US
There are signs that some investors are looking to move money out of US assets and into Europe instead, fund manager Jupiter says this morning.
Jupiter told shareholders that there was “elevated market volatility” across asset classes in April “as a result of trade policies” (a reference to the crash, and partial rebound, after Trump’s ‘Liberation Day’ tariff announcement).
Jupiter says this will “undoubtedly have an impact on client risk appetite”, adding:
We also see early-stage evidence of asset owners and other investors looking to reallocate away from the US and towards other markets, such as the UK, Europe and Asia Pacific.
Volatility isn’t all bad, though – Jupiter reckon mispriced assets present an opportunity for active asset managers.
It also reported a £1bn drop in assets under management in the last quarter, to £44.3bn, driven by net outflows of £500m and negative market movements of £500m.
FT: Donald Trump to exempt carmakers from some US tariffs
Donald Trump’s tariff flip-flopping is continuing this week, with reports that the US president is planning to spare carmakers from some of his most onerous tariffs.
According to the Financial Times, the US is now planning to exempt car parts from the tariffs that Trump is imposing on imports from China to counter its role in fentanyl chemical exports, as well from those levied on steel and aluminium
The u-turn comes after intense lobbying by industry executives over recent weeks, who have been warning the White House about the damage that tariffs will cause
But it won’t spare the car industry completely from Trump’s trade war.
As the FT explains:
The exemptions would leave in place a 25 per cent tariff Trump imposed on all imports of foreign-made cars. A separate 25 per cent levy on parts would also remain and is due to take effect from May 3.
More here (£).
ACEA’s latest European car sales report shows a continued decline in demand for fossil fuel-powered vehicles.
While new battery-electric car sales grew by 23.9% in the first three months of 2025, to 412,997 units, petrol car registrations saw a significant decline of 20.6%, with all major markets showing decreases.
France experienced the steepest drop, ACEA reports, with petrol registrations plummeting by 34.1%, followed by Germany (-26.6%), Italy (-15.8%), and Spain (-9.5%).
The diesel car market declined by 27.1%.
Tesla’s European sales slide continues
Tesla’s share of the European car market has dropped again, following protests against the car maker’s CEO, Elon Musk.
Tesla’s market share in the European Union, the UK and the EFTA trade zone (Iceland, Liechtenstein, Norway, and Switzerland) fell to 2% in March, down from 2.9% in March 2024.
Total sales in the month fell to 28,502, down from 39,684 a year ago, new data from the European Automobile Manufacturers’ Association (ACEA) this morning show.
During 2025 so far, Tesla’s market share in the EU/UK/EFTA has dropped to 1.6%, from 2.5% in January-March 2024. Its sales are down 37%, to 54,020 from 86,027 in Q1 2024.
That’s despite a near-24% increase in overall battery-electric car sales in Europe so far this year.
Overall, car sales across Europe dipped by 0.2% in March, and are down 1.9% so far this year.
Earlier this week, Tesla reported a sharp tumble in profits and revenues in the first quarter of 2025 amid a backlash against his role in the Trump White House, where he has been driving cutbacks to federal services.
Protests against Musk, and Tesla, have been taking place in the US and across Europe in recent weeks, prompting reports of a European consumer backlash by some Tesla owners and prospective buyers.
Tesla’s recent sales decline has also been blamed on its ageing lineup of models (its Model Y has just been updated) and intense competition from rivals such as China’s BYD, as well as the backlash from Musk’s embrace of rightwing politics.
Introduction: BoE governor Bailey warns trade war will hit UK growth
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Fears are mounting that Donald Trump’s trade war will hurt the UK economy, even as the US president backtracks over some of his tougher measures.
Even though Britain is getting off relatively lightly with a 10% tariff, new trade disruption is likely to damage economic growth.
Andrew Bailey, the governor of the Bank of England, sounded the alarm in Washington last night, where the International Monetary Fund’s Spring Meeting is taking place.
Bailey told an Institute of International Finance event that the UK’s open economy was vulnerable to a global trade war.
Bailey explained:
“It’s not just the relationship between the US and the UK, it’s the relationship between the US, the UK and the rest of the world that matters so because the UK is such an open economy.
“We have to take very seriously the risk to growth. I’ve said a number of times, fragmenting the world economy will be bad for growth.”
The Bank will release its latest economic forecasts in two weeks, when it is widely expected to cut UK interest rates.
Earlier this week the IMF cut its forecast for UK growth this year to 1.1%, down from 1.6% predicted in January
The UK government has been pushing for a trade deal with the US. But on Wednesday, chancellor Rachel Reeves dashed hopes of an early breakthrough in negotiations, stressing that the UK is “not going to rush” into a deal.
Financial markets rallied yesterday after Trump said his tariffs on China would come down “substantially”, but not to zero.
These hints that the US might de-escalate tensions with Beijing are lifting the “mood music” in the markets, reports Michael Brown, senior research strategist at brokerage Pepperstone.
Brown adds:
Isn’t it remarkable how the ‘Art of the Deal’ appears to simply be for Trump to negotiate with himself (aka fold like a cheap suit), then to end up jumping around claiming a ‘win’ anyway.
The agenda
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9am BST: IFO survey of Germany’s business climate
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11am BST: CBI’s industrial trends survey of UK manufacturing
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1pm BST: IMF to release Global Policy Agenda report
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1.30pm BST: US weekly jobless claims data
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1.30pm BST: US durable goods orders
