economy
January 18, 2026
Trump tariff threats are bad, but the uncertainty they instil is much worse
The spectre of rising inflation, slowing global trade and jittery markets has re-emerged as US economic policy divorces itself from any logic
TL;DR
- Trump's tariff threats pose a political and economic challenge for European leaders.
- The IMF has consistently warned that trade policy uncertainty negatively impacts business investment.
- The UK and EU believed they had certainty after recent trade deals with the US.
- New tariffs could disrupt the economies of France and Germany, and hinder the UK's recovery.
- A significant risk is resurgent inflation in the US due to higher import costs.
- Higher inflation could prevent the Federal Reserve from cutting interest rates, a goal of Trump's.
- There's a risk that Trump's actions could destabilize US financial markets.
- Investors may dismiss the threat, assuming Trump will back down, as in the past ('Taco' - Trump Always Chickens Out).
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