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The tariffs Trump has just announced will be paid for by the businesses which import goods into the US.
Clarissa Hahn, economist at Oxford Economics, says this means that the initial impact of price rises will be on US consumers, as American firms are likely to pass on the extra costs to their customers.
However, she adds people in the UK could subsequently be affected by the measures, which come into effect on 5 April.
One way is via the value of the pound and exchange rates, which dictate the cost to UK businesses importing goods and raw materials from abroad. If import costs go up, these extra costs could be passed on to consumers through higher prices.
Following Trump’s speech on Wednesday, exchange rates between the dollar and pound fluctuated. If the value of the dollar strengthens as some economists have predicted, import costs could rise for UK firms importing goods.
Higher prices in the UK could also “prompt workers to demand higher wages”, which would further raise costs for businesses, according to Ahmet Ihsan Kaya, principal economist, at the National Institute of Economic and Social Research.
Ms Hahn adds if the UK government decides to retaliate with tariffs of its own on US goods entering the UK, there is a risk UK prices could rise if British businesses pass on extra costs to customers.
However, some economists have suggested prices could also initially fall as a result of Trump’s decision to impose tariffs.
Swati Dhingra, economist and member of the Bank of England’s monetary policy committee, which sets interest rates, has suggested that firms which normally send their goods to the US, may instead send them to countries such as the UK which don’t have such steep tariffs, potentially leading to a flood of cheaper goods in the UK.
“Tariffs of the proposed magnitude are likely to prompt firms that export to the US to lower their prices to retain demand for their products,” she suggests.
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