LAST night Donald Trump unveiled the biggest shake up in global trade since the Second World War.
What the US President called “Liberation Day” and one of the most important days in American history was also a day of reckoning for how countries and companies around the world do .
Millions were glued to the TV screens – squinting at a placard that was blowing in the wind in the garden – which listed the hefty tariffs that would be introduced overnight.
So what does this really mean for Britain's economy? Here we explain exactly what the impact will be:
What's happened to the UK?
The UK has been hit by a 10 per cent tariff – what the White House calls the baseline rate – on all goods imported into the .
But it's bad news for British car makers as Trump confirmed all foreign car imports will be subject to a further 25 per cent tariff.
The US imports £60.4billion British goods, fractionally more than the £57.9billion the UK imports from America.
The UK has been given the lowest rate of tariff.
By comparison has been hit with a 34 per cent “reciprocal tariff” – half the 67 per cent rate Trump claims China charges US importers.
However, added to the existing rate of tariffs on China, it takes the levy up to 50 per cent.
, where many Western companies have factories, will now face a 46 per cent tariff.
is hit with 24 per cent and Taiwan faces 32 per cent.
The EU will also face a 20 per cent – higher than the UK.
What is a tariff?
In effect, it is a tax on foreign goods coming into a country.
It is paid by the company which imports goods, to the country’s government.
Most tariffs are set as a percentage of the value of the goods.
For example, a 10 per cent tariff would mean a charge of $5 on a $500 handbag while a 25 per cent tariff on a $40,000 car would be a $10,000 hit.
Typically it makes the price of that product more expensive as the tariff is passed straight onto consumers.
Tariffs have the specific purpose of giving home grown companies an advantage over foreign producers trying to sell goods in a market.
Why is Trump doing this?
Trump has long been a fan of tariffs – infamously describing them as the “most beautiful word in the dictionary”.
He has raged for years about the unfairness of other countries slapping taxes on the import of US goods, with the EU a particular target of his rage after flooding the American market with BMW and cars.
Last night he stepped up his attack accusing countries of “looting, raping and pillaging” America.
Trump believes that introducing tariffs will encourage more companies to build factories in America to avoid tariffs, and that US consumers will be more likely to buy “made in America” products if they are cheaper as a result of being tariff-free.
He said that these tariffs will “Make America Wealthy Again”.
How will this hit the economy?
Britain's already fragile growth will be almost immediately dented by all this uncertainty.
The Budget watchdog had previously warned it could wipe out UK economic growth by 1 per cent and wipe out the £9.9billion headroom so carefully reinstated by the Chancellor just last week.
This could mean further tax rises or even deeper spending cuts.
The stock – which many of our pension funds invest in – have also tanked this morning.
‘s index sank by 1 per cent, the FTSE 250 – which ranks mid-cap sized listed companies – down by 0.82 per cent.
The slump in stock markets, such as the FTSE 100, can be read as investors increasingly pessimistic views about the state of those countries' economies.
European stock markets in and fell even more heavily.
In Japan the Nikkei index has dropped by 2.77 per cent.
In short a sea of flashing red lights on global stock markets. Meanwhile more investors are piling into gold, which is seen as a safer asset, and prices are back at record highs of over $3,1000 an ounce.
Job losses
There are huge fears that the tariffs will lead to job losses.
As well as hiking prices, companies will have to make significant cost cuts to survive the pressure from extra duties.
More than 25,000 in the motor industry are thought to be at risk from Trump's 25 per cent tariff on car imports, according to the Institute For Public Policy Research.
Around 17 per cent of UK car exports were to the US last year , worth £7.6billion.
What does it mean for UK consumers?
One word: pain.
Tariffs are a nightmare for business, because it makes the flow of goods around the world much more expensive.
As we found out from the hangover of the , any snarl in supply chains leads to prices soaring.
Companies that also make products in countries, such as Vietnam, China, and which are now whacked with higher tariffs, will also have to hike prices to cover the higher costs.
Analysts reckon that sports brands which include the likes of , Adidas, Puma will have to hike prices in the US by a whopping 20 per cent in order to defend their profits and it's impossible to think that there won't be a knock-on here too.
That means even more expensive trainers.
Shares in all the sports brands have tumbled this morning.
There is the counter argument that goods could become cheaper as companies divert products originally destined for the USD to the UK.
But, in the long term, the big risk is that this so-called “diversionary trade” ends up flooding our market with cheap imports – ruining British homegrown companies who can’t compete and costing thousands of jobs.
What happens next?
The British government is still betting it might be able to negotiate better terms.
Business Secretary this morning indicated it had a package of measures – which is thought to include sweeteners such as lower taxes for US tech giants and trade deals on US .
Trump has signalled these tariffs are the starting point to negotiations.
But last night he was quite clear – the only route to zero tariffs is to drop tariffs on US imports.
Currently, the UK still charges the US 10 per cent imports on items such as oranges grown in .
