Trump’s trade tariffs would threaten economic growth, Bank of England’s Lombardelli warns – business live | Business
Key events
Budget airline easyJet has swelled its profits, despite the turmoil in the Middle East hitting demand.
EasyJet has reported a pre-tax profit of £602m for the year to 30 September, £170m than the previous year.
This earnings surge was driven by strong demand over the summer; easyJet had made a loss of £350m in the six months to 31 March, as conflict in the Middle East led to flight cancellations, extra costs and revenues.
Outgoing CEO Johan Lundgren, says:
“This strong performance - resulting in a 34% increase in our annual profits - reflects the effectiveness and execution of our strategy as well as continued popularity of our flights and holidays. It also represents a significant step towards our goal of sustainably generating over £1 billion annual profit before tax.
Profits were also lifted by charges for cabin bags and “leisure bundles”; last week, easyJet was one of five airlines fined in Spain for charging passengers for hand luggage and seat reservations….
Lighthizer protegé named as US trade representative
Overnight, Donald Trump has picked a protegé of Robert Lighthizer, his trade representative in the first Trump administration, to lead trade policy in Trump 2.0.
JamiesonGreer, an attorney, will serve as the next US trade representative, Trump announced ovenight, and will be tasked with reining in the trade deficit and opening up “export markets everywhere”.
Greer, 44, served as chief of staff to Lighthizer, who designed Trump’s original tariffs on some $370bn worth of Chinese imports, and also renegotiated the North American free trade deal with Canada and Mexico.
Lighthizer, an arch protectionist and sometime free-trade skeptic, blasted “globalists” and other ideological free-traders in his recent book, “No Trade Is Free”.
Introduction: Policymakers count cost of Trump tariffs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A day after Donald Trump announced plans for fresh tariffs on Canada, Mexico and China, policymakers around the world are digesting the consequences of “Tariff Man” Trump returning to the White House.
A deputy governor at the Bank of England, ClareLombardelli, has warned that the president-elect’s proposed trade tariff would pose a risk to economic growth in countries including the UK.
Speaking to the Financial Times, Lombardelli explained that Trump’s trade policies could hit growth in the short term, while long-term productivity also suffers from increased trade frictions.
She says:
“I don’t want to speculate on the specifics but we know barriers to trade are not a good thing, whether they are tariffs or regulatory or others.
“Whether you are an economic historian, an economic theorist or a data-driven economist, the impact is clear in terms of its direction. In terms of its size, that depends on the circumstances.”
Trump rattled the financial markets yesterday by announcing he would impose 25% tariffs on Canada and Mexico, and an extra 10% on China, in a crackdown on immigration and drugs.
Trade experts fear that Trump could spark a global trade war, if other countries retaliate with their own tariffs in response.
KeithRockwell, a former director at the WorldTradeOrganization, explained:
“The United States exports hundreds of billions of dollars worth of goods to these countries. Anyone who expects that they will stand pat and not retaliate has not been paying attention.”
Trump’s proposed tariffs are likely to push up inflation in the US, as importers will pass the higher costs onto consumers – and possibly add a bit more on top!
But they could have a deflationary impact on other countries; China, for example, could reroute shipments to Europe rather than the US, cutting prices to support its sales.
They also pose a political dilemma for the UK – should it try to align with the US, to avoid being hit by tariffs too, or try to get closer to the EU?
Simon Sutcliffe, Customs & Excise Duty Partner at accountancy firm Blick Rothenberg, says the US hasn’t considered such a protectionist trade policy since the 1930s with the Smoot-Hawley Act – which ended up fuelling the Great Depression.
Sutcliffe says SirKeirStarmer faces a dilemma:
One of the biggest stumbling blocks in the UK’s trading relationship with the EU is the control and administration surrounding the movement of food products. Moving closer to the EU may allow development of a consistent and streamlined food policy which would reduce trade red tape and extra charges.”
“However, aligning with the US would undermine that attempt, as the EU would be exceptionally resistant to allow US originating food products to ‘seep’ into its marketplace, resulting in the administrative burden on food movements being cemented in for longer.”
“But ‘Refusing’ the US may result in UK exporters being subject to US tariffs on their products. The US is the largest individual trading partner of the UK trading with roughly 30% of our total exports going to the US and the US exporting 10% of its goods to the UK, so any tariffs would have a big impact on UK trade.”
Also coming up today
We’ll get a full-body health check on the US economy today, with a flurry of economic data – from GDP to trade and jobless claims – being rushed out ahead of the Thanksgiving holiday tomorrow.
The agenda
9.30am GMT: GfK survey of German consumer confidence
