There’s only been one talking point in the financial world, and probably across most households, in the last few weeks. Donald Trump, recently elected for a second term as US President, has imposed a series of tariffs on all imports, as he seeks to deliver on his promise to voters to ‘make America great again’.

He never was the most popular person away from his die-hard supporters in the US and most people I talk to about him haven’t got a good word to say for him. For a lot of folk, therefore, the tariffs have got to be a bad thing just because they are associated with President Trump. But is that the truth of the matter or are these measures actually a sound and justified financial proposition? Let’s not forget, Trump was a hugely successful businessman before he entered politics.

Struggle for supremacy

Although the US President has talked about tariffs on all imports to the US, his main target is undoubtedly China. It’s quite a struggle for supremacy between probably the two most powerful nations in the world. But it’s not a new thing. Trump introduced some tariffs in his first spell in office, most of which his successor, Joe Biden, retained during his presidency. This time around, they have been ramped up on a monumental scale.

A lot of American imports are in the motor industry and Trump’s rationale for his initial tariffs first time around was an attempt to protect the US motor trade. It didn’t really succeed and there were significant business failures and job losses in middle America. It wasn’t a comfortable time at all. Since then things have worsened with the development of the electric car market. China now produces 60% of the world’s electric cars and 80% of the batteries that power them.

Where is it all going to end? That really depends on China’s response. If they negotiate with Trump, we may get a workable solution, but it will mean a lot of giving ground from two superpowers who are generally inclined not to do so. If there is no negotiation, none of us know what the outcome might be, but some form of financial meltdown must be a possibility.

In the meantime, we sit on the periphery in the UK, hoping that everything calms down from the recent hiatus, reducing the risks that this brings to businesses and therefore jobs, inflation and the stock market that influences investments and pensions.

It’s definitely a case of ‘watch this space’.