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
-
9am BST: IFO survey of Germany’s business climate
-
11am BST: CBI’s industrial trends survey of UK manufacturing
-
1pm BST: IMF to release Global Policy Agenda report
-
1.30pm BST: US weekly jobless claims data
-
1.30pm BST: US durable goods orders
Key events
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
-
9am BST: IFO survey of Germany’s business climate
-
11am BST: CBI’s industrial trends survey of UK manufacturing
-
1pm BST: IMF to release Global Policy Agenda report
-
1.30pm BST: US weekly jobless claims data
-
1.30pm BST: US durable goods orders
