Threat of global trade war pulls down Brits’ economic confidence
Consumer confidence in the UK has taken a steep tack downward thanks to the emerging trade war between the US and the rest of the world.
Consumer expectations over the next three months on the state of the economy dropped significantly to -48 in April, down from -35 in March, according to the British Retail Consortium.
The data was collected in the week after tariffs were announced but before Trump reduced non-China import taxes, between April 4 and April 7.
“It is unsurprising that consumer expectations for the economy plummeted to a record low [after the tariff announcement],” Helen Dickinson, Chief executive of the British Retail Consortium, said.
Consumers’ expectations over the next three months on their personal financial situation worsened to -16 in April, down from -10 in March, while their personal spending fell slightly to +10 in April, down from +11 in March.
“Even with a pause on many of the US tariffs, business and consumer confidence remains fragile,” Dickinson added.
“Many retailers are also concerned about the risk of cheap Chinese products being diverted from the US to other destinations, including the UK.”
Unable to sell competitively in the US due to US President Donald Trump’s 104 per cent tariffs on goods from China, as well as his decision to end the de minimis loophole for small shipments of goods, suppliers will increasingly be pushed to Europe, retailers said.
“There’s a potential indirect effect for UK retailers through global sourcing. If goods from places like China or Vietnam can’t get into the US, they may be redirected elsewhere, potentially lowering prices in markets like the UK.
“That could create opportunities if retailers are nimble to pickup this cheaper stock, but also risk of more low price competition,” Tim Black, economist at Frontier Economics, said.
If Brits’ personal finances stay stretched and confidence remains low, disposable spending will focus on the cheaper goods coming into the country, rather than on British retailers.
Dickinson said that the government’s decision to launch a review into low-value imports, currently free from customs duty under the de minimis rule, was “most welcome”.
“A review of this policy, which was designed to reduce the burden on low volume, low value imports, was already needed. With retailers seeing a rise in the number of potentially non-compliant products entering the UK market, it’s even more critical now,” she said.