If Donald Trump has nightmares – although nothing about the American President suggests he sleeps any less than soundly – those troubled dreams may well feature ‘avocado smash.’
Most US avocados come from Mexico you see, and he has just placed a 25% tariff (subject to ongoing will-he-won’t-he negotiations) on them. That means the price of the hipster’s favourite breakfast will be going up. As the hipster-vote almost certainly heavily skews Democrat, Trump is unlikely to fret too much over that, but he will be worried about the inflationary effect of his tariffs on the US consumer sector, in general.
The price of eggs featured prominently in his recent campaign against Kamala Harris. As it had risen sharply during the Democrat Party’s four-year term. Voters did not like that. And broad-based tariffs, like the ones Trump is proposing, will put up the price of everything. Rocketing consumer sector inflation, then, might do for Trump what, it did for Harris – help him lose the White House in 2028.
As The Daily Telegraph points out, “Trump has frequently portrayed tariffs as a tax on foreign countries, but this isn’t true. It is the importer – in this case, American companies importing foreign goods affected by tariffs – who pays the levy. They typically pass these additional costs on to customers, meaning it is US consumers who are likely to bear the brunt.”
The non-partisan Peterson Institute for International Economics, reports the paper, is suggesting the tariffs “could cost the average US household around $1,200 (£930) per year by driving up prices faced by domestic consumers and firms.”
$1,200 is a lot. And, historically, people’s wallets, whether Democrats or Republican, tend to vote for low prices.
But what about UK exporters? As The Grocer comments, “Even though in the UK we have a trade deficit with the US, that won’t stop Trump pressurising successful UK food manufacturers to switch production of US-bound goods across the Atlantic.” That means many big names may be forced to move some output stateside.
Elsewhere, in the fashion sector, key UK players are already considering a response to this new political environment. Next, Retail Gazette reports, “is exploring setting up a US corporate entity to handle operations more efficiently. By doing so, the retailer could reduce its tariff burden by paying duties only on the cost price of goods rather than the selling price.”
However, somewhat alarmingly, the White House seem to have identified UK VAT as a trade barrier, implying it may be included in reciprocal tariff calculations. The Telegraph again, “Economists have calculated that doing so could lead to a 21pc levy on UK goods exports to the US.”
The American president may well be sleeping soundly, but US and UK Consumer Sector CEOs? A little less so.