- Summary:
- The FTSE 100 and the UK's economy could benefit from the spoils of trade war that results from the grandstanding between the US and EU.
The FTSE 100 Index followed a downward trajectory as highly expected on Thursday as markets reacted to US “reciprocal” tariffs. Eight of the top ten stocks in the Index traded downward, with HSBC (-5.2%), BP (-2.7%), Shell (-2.35), Rolls Royce (-1.9%) and Relx (-1.7%) headlining the losers’ list. While the UK incurred a comparatively smaller tariff hike from her long-term ally, traders are concerned about the larger impact that could set in from retaliatory tariffs.
The UK’s Economy Could Benefit from the Spoils Of War
US President Donald Trump announced a universal 10% tariff on all imports into the country from April 5, with steeper tariffs on 60 countries scheduled to set in on April 9. The US was the UK’s largest export market in 2024, accounting for 16.1% of exported goods. The European Union, the UK’s second-largest export destination is among the worst casualties of Trump’s tariff measures, with a 20% tariff set to be imposed on goods originating from the economic block.
EU leaders had already expressed their intention to retaliate against the US, with Germany’s Economy Minister Robert Habeck stating in a news conference that Trump will buckle under pressure from Germany and the EU.
Nonetheless, the trade grandstanding between the EU and the UK could potentially benefit the UK. With America raising the barrier on goods from the Eurozone, the UK’s economy could benefit from trade diversion that results from businesses relocating from the EU to the UK.
That could see the British economy and the FTSE 100 Index benefit from the spoils of trade war, thanks to the lower US tariffs on UK. Prime Minister Keir Starmer stated on Wednesday that the UK will not rush into a trade war with the US, signaling that the status quo is likely to remain.
FTSE 100 Index Prediction
The FTSE 100 Index will likely stay on the downtrend if the barrier at 8,522 points persists. That will likely see the first support established at 8,464. A stronger downward momentum will break below that level and test 8,434 points.
On the flip side, moving above 8,522 points will shift the momentum to the upside. That will likely see the first resistance encountered at 8,543. The downside narrative will be invalid if the price breaches that mark. Also, an extended control by the sellers could send the FTSE Index higher and test 8,576.
