President Trump’s Liberation Day tariffs set the cat among the pigeons in the stock markets.
But it’s not just businesses reeling from the ramifications, because this will affect all of our finances.
It means it’s worth getting to grips with what it’s likely to mean for you.
This article isn’t personal advice. Take advice if you’re not sure what’s right for you. Investments and any income from them can rise and fall in value, so you could get back less than you invest. ISA, pension and tax rules can change, and benefits depend on individual circumstances.
What do Trump’s tariffs mean for your investments?
The impact on markets has been stark, with stocks around the world experiencing some heavy losses.
But for investors owning quality companies, either directly or through collective investments like funds, over the long term, big bumps in the road are part of the journey.
During stock market volatility, investors should stay focused on the long term.
It’s also important to make sure you’re well diversified, without too much invested in any one region, and with money spread across different types of investments and geographies.
Time in the market and diversification have consistently been the foundations of successful investing strategies and that isn’t going to change no matter how much market noise there is.
What could it mean for pensioners?
The market turbulence caused by Trump’s tariffs will have unsettled many pension investors, but it’s important not to panic.
Making knee-jerk reactions like changing investment strategy or cutting back on contributions can crystallise losses and make it harder for your pension fund to recover, which can impact your retirement income.
For those coming up to retirement, we could see people choosing to put off taking an income from their pension through drawdown until the situation is more settled.
We could also see more people opt for a guaranteed income through an annuity.
These are offering good value right now. The most recent data from HL’s annuity search engine shows a 65-year-old from an average postcode with a £100,000 pension can get up to £7,685 per year from a single life level annuity with a five-year guarantee.
With the potential for interest rates cuts in the coming months and the impact on long-term gilt yields uncertain, we could see more people take the plunge now. But remember that once set up, annuities can’t usually be changed. So. it’s important to consider your options carefully.
If you’re in retirement and using income drawdown, it’s worth considering a natural yield approach, where you only take the income yielded by your investments.
This does mean income can fluctuate though.
To help manage any expenses in case of emergency, it’s a good idea to keep one to three years’ worth of essential expenses in an easy-access account to supplement your income during these times.
Remember, annuity quotes are only guaranteed for a limited time and will vary depending on individual circumstances.
This article isn’t personal advice. The government’s Pension Wise service can help if you’re over 50 and need guidance. You can also get personalised financial advice if you need it.
What could Trump’s tariffs mean for inflation, mortgages and taxes?
Modelling the impact of so many unknowns is always tricky.
There’s the risk that companies increase their prices to make up for the cost of tariffs, and pass the pain onto consumers.
On the flip side, there’s also the chance that firms cut prices in order to compete in the US, so there could actually be price cuts on the way.
But in the short term we could also see goods destined for the US make their way to the UK instead because of tariffs, flooding the market and bringing down prices.
It means the outlook for inflation isn’t entirely certain.
With inflation in the balance, the Bank of England’s job of controlling it isn’t easy.
On the plus side, right now, the market doesn’t think inflation will be the bank’s biggest worry.
It’s assuming that all these tariffs hit global trade, putting the Bank of England under pressure to cut rates to support growth, so it’s pricing in more cuts.
What could this mean for mortgages?
The uncertainty means that if you have a remortgage looming, it’s well worth shopping around for a deal as early as possible.
If rates rise between now and when you need to remortgage, you’ll have locked in a cheaper deal, and if they fall, you can track down something more competitive.
Will taxes go up because of tariffs?
Another big unknown on the horizon is the potential impact on tax.
The government is counting on growth to help boost the tax take and keep it on track.
If growth is derailed by global uncertainty, it could mean that by the time we get to the Autumn Budget, the government is back in revenue-raising territory again.
A day is a long time in global trade right now – let alone a week, so it’s difficult to be certain of the position this far ahead.
However, in the interim, it makes sense to focus on no regret tax-saving moves you’ll be grateful for, even if there are no changes to tax – like making the most of ISA and pension allowances.
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