Trump tariffs risk ‘pushing up UK borrowing costs'
The FTSE 100 asset manager said the US president's trade policies and tax-cutting plans would 'cause debt dynamics to worsen' around the world, in a further blow for Rachel Reeves as she struggles to fill a black hole in the public finances.
The interest bill on Britain's national debt risks being dragged higher because of 'US influence over the global economy and financial system', Schroders said.
US borrowing costs act as a benchmark for the world and British rates track trends in the American market particularly closely.
This link was illustrated in January when Britain's borrowing costs briefly surged. This was 'driven in large part by the impact of rising US treasury yields' and their impact on UK gilts, as government debt is known, Schroders said.
US bond yields – a benchmark for the cost of servicing national debt globally – have risen sharply since Mr Trump announced his 'liberation day' tariffs in April.
The 30-year US treasury yield has climbed from 4.41pc in the immediate aftermath of the president's announcement to 4.95pc on Monday. Over the same period, the yield on UK 30-year gilts has climbed from 5.11pc to 5.46pc.
Potential rise of borrowing costs
The rise has significant implications for the Chancellor. Each percentage point increase in US treasury yields 'causes fiscal positions in the UK and France to also deteriorate by about 1pc of GDP', Schroders estimated.
Schroders said: 'This dynamic can expose relatively weak sovereigns such as the UK and Brazil that rely on foreign funding.'
It said the 'huge uncertainty' caused by Mr Trump's tariffs and his 'one big beautiful bill' were 'adding to market concerns about the large US budget deficit'. As a result, US borrowing costs – and those around the world – could rise further.
David Rees, of Schroders, said: 'It remains to be seen if recent policy announcements by the Trump administration have damaged the 'exorbitant privilege' that the US has historically relied upon to fund large deficits.
'But even if foreign demand for treasuries holds up, rising yields could still drag long term interest rates higher in the rest of the world and expose already weak sovereigns such as France and the UK.'
The Chancellor faces a shortfall of up to £30bn in her Budget in the autumn, partially fuelled by rising debt costs.
The Treasury declined to comment.
Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
8 minutes ago
- Yahoo
Trump Media brings Truth token plans into the open in latest SEC filing
Trump Media has formally disclosed plans for a Truth-branded utility token and digital wallet in its latest Securities and Exchange Commission filing, months after first teasing the concept in a shareholder letter. The filing describes the token as part of a 'larger rewards program' integrated into a 'Truth digital wallet,' initially allowing users to pay for Truth+ subscriptions. Over time, the token could be applied to other products and services 'in the Truth ecosphere,' hinting at a broader platform-wide utility. While the company doesn't explicitly call it a cryptocurrency, the language suggests blockchain-based infrastructure is likely. The Q2 filing marks the first time the initiative has been included in public financial documents, indicating the project is now being treated as a core component of Trump Media's crypto strategy. It comes amid an aggressive and broadening digital asset pivot. In July, Trump Media deployed $2 billion into Bitcoin and Bitcoin-related securities, making it the fifth-largest public holder of the top cryptocurrency globally. The firm said it raised $2.4 billion in May via a private placement backed by institutional investors, with $1 billion now sitting in restricted cash as collateral for convertible notes, according to the filing. The company also filed for several crypto exchange-traded funds under its fintech division, including funds tied to Bitcoin, Ethereum, and a 'Crypto Blue Chip' index. Trump Media posted $2.3 million in operating cash flow, its first positive quarter, but still recorded a net loss of $20 million, driven by stock-based compensation and lingering legal fees from its 2024 SPAC merger. CEO Devin Nunes has framed the company's crypto exposure as a safeguard against what he calls 'debanking and other acts of political discrimination' by the traditional financial system. Crypto market movers Bitcoin has gained 0.1% in the past 24 hours and is trading at $113,700. Ethereum is down 0.4% in the same period to $3,470. What we're reading UK lifts ban on crypto-linked notes for retail investors after 5 years — DL News Can be dethroned? — Milk Road By Not Staying Chain-Agnostic With Base, Could Coinbase Make a Wrong Bet? — Unchained Bitcoin and Ethereum ETFs suffer second-worst day of 2025 in 'odd end' to landmark week for crypto — DL News Kyle Baird is DL News' Weekend Editor. Got a tip? Email at kbaird@ Sign in to access your portfolio
Miami Herald
9 minutes ago
- Miami Herald
Stocks will try to recover their mojo this week
So after Friday, when the all the stocks in the Standard & Poor's 500 fell an average 1% and the major averages fell more than 2% in a week, it's understandable to ask, "OK, now what?" Don't miss the move: Subscribe to TheStreet's free daily newsletter Well, there are 1,382 earnings reports to think about. There's the economy, too. And all the tariff negotiations to consider. Will there be a deal with China? Can Canada kiss and make up with the Trump administration? How about we think about only a few earnings (we'll get to them shortly) and some of the forces that may well affect markets more than we expect now. Related: Warren Buffett's stock still struggling since May peak The Standard & Poor's 500 Index managed to hit five straight new closing highs between July 21 and July 28. The index then closed lower each day for the next four days ending with Friday's bust, with the S&P 500 off 1.6% for the day. The question is if those four days of selling were one-offs. Let's look at four realities. The indexes and many stocks have been giving off signals for weeks that it was getting to be overbought. Multiples have expanded until something triggered professional money managers to decide to wait for better prices. You saw it Thursday when the Federal Reserve held rates steady and wouldn't say when a rate is coming. You saw it Friday after reports from (AMZN) and Coinbase Global (COIN) disappointed investors. Not so much because the jobs created came in less than expected. It was the huge revisions for May and June that enraged President Trump enough to fire the head of the Bureau of Labor Statistics, accusing her of cooking the data to make him look bad. (Without evidence) This is a month, which, the Stock Traders Almanac tells us, is the worst month of the year for the Dow Jones Industrial Average and second worst month for the S&P 500 and Nasdaq Composite Index. Related: Veteran trader takes hard look at Microsoft Q4 report and sends a warning They're doing back-to-school shopping. They're worried about wild fires in the West. Along the southern Atlantic and Gulf coasts, they're watching for hurricanes. China, Mexico and Canada negotiations are moving slowly. And they're starting to be a problem for many companies that can't absorb higher costs. Listen carefully when Walmart (WMT) reports earnings on Aug. 21. Last week's selloff pushed bond yields lower. Especially the 10-year Treasury note, the key determinant of mortgage rates. The rate on a 30-year mortgage was pushing toward 6.6%. Enough to save a home buyer upwards of $1,200 a year if buying a $300,000 home with 15% down. That assumes buyers and sellers can agree on prices that make sense. Did it affect stocks last week? It sure did. Shares of D.R. Horton (DHI) jumped 5.2% to $150.30 on Friday as bond yields came down. Horton, Pultegroup (PHM) , Lennar (LEN) and (NVR) were all sharply higher Friday and led the S&P 500's Consumer Discretionary Sector. The sector index was down 3.6%, partly because of Amazon's 8.3% tumble. Michael M. Santiago/Getty Images Start with Palantir (PLTR) , which reports after Monday's close. The stock fell 2.9% last week, but it is up 13.2% this quarter and 104% this year. This an artificial intelligence play. It takes lots and lots of data and makes sense of it for military and big corporate clients. Revenue estimate: Earnings of 12 cents a share, up 33%. Revenue of $939 million would be up 38%. It is a pricey stock: Its simple price earnings ratio is 674. Its forward p/e ratio is 328. More Palantir Veteran trader surprises with Palantir price target and commentsMusk moves xAI, Grok onto Palantir turfVeteran analyst sends bold message on Palantir stock targetPalantir makes surprise move into weather On the AI vein, chipmaker Advanced Micro Devices (AMD) reports after Tuesday's close. The revenue estimate is $7.4 billion, up 27.2%. Earnings are projected at 40 cents, but down 42%. Eaton Corp (ETN) , maker of important gear used in AI applications, also reports Tuesday. Related: A country is ready to scrap all visas for Americans Wednesday brings in consumer stocks, especially McDonald's (MCD) and Walt Disney Co. (DIS) . Both should have lots to say about what consumers are telling them. Neither is expected to report big earnings and revenue gains. Eli Lilly (LLY) and Gilead Sciences (GILD) lead the Thursday earnings. The former has a big weight drug Zepound with more in the pipeline. Also reporting Uber Technologies (UBER) , DoorDash (DASH) , Shopify (SHOP) and Airbnb (ABNB) . Related: Costco has a serious credit card problem The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
17 minutes ago
- Yahoo
Wall Street's Biggest Showdown -- Donald Trump vs. Jerome Powell -- Has Likely Already Been Decided but Not for the Reason You Might Think
Key Points The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average have endured heightened volatility in 2025, with President Trump's tariff policy whipsawing Wall Street. Trump continues to pressure Fed Chair Jerome Powell to lower interest rates, with some media outlets suggesting the president could "fire" him. However, data from the June inflation report suggests the battle between Trump and Powell has already been decided. 10 stocks we like better than S&P 500 Index › Though volatility is a given when putting your money to work on Wall Street, it's been an exceptionally wild ride for investors through the first seven months of 2025. During the first week of April, uncertainty crescendoed following President Donald Trump's tariff and trade policy announcements. This led the benchmark S&P 500 (SNPINDEX: ^GSPC) to its fifth-steepest two-day percentage decline since 1950 and pushed the iconic Dow Jones Industrial Average (DJINDICES: ^DJI) and growth stock-powered Nasdaq Composite (NASDAQINDEX: ^IXIC) into correction territory and a bear market, respectively. However, all three indexes have enjoyed an equally robust three-plus-month rebound in the wake of President Trump pausing higher "reciprocal tariffs" on select countries. For only the sixth time in its storied history, the S&P 500 gained at least 25% in a three-month period. But just because the S&P 500 and Nasdaq Composite have hit new highs doesn't mean Wall Street's biggest showdown -- Donald Trump vs. Federal Reserve Chair Jerome Powell -- is taking a back seat. While Trump is insistent that the central bank needs to lower interest rates, this ongoing battle between two key figures has, in all likelihood, already been decided -- and it may not be for the reason you're thinking. Can Fed Chair Jerome Powell be fired? Interest rates are at the heart of this Wall Street clash. When U.S. money supply skyrocketed at its fastest pace in history on a year-over-year basis during the COVID-19 pandemic, it sparked the highest prevailing rate of inflation in four decades. In response to rapidly rising prices, the Fed kicked off its most aggressive rate-hiking cycle in decades, with the fed funds rate (the overnight lending rate between U.S. banks) moving up 525 basis points between March 2022 and July 2023. Adjusting the fed funds rate influences everything from lending rates to yields on savings accounts. During tightening cycles, which is where the central bank increases the fed funds rate, the Fed is usually attempting to cool down the prevailing rate of inflation. In comparison, it tends to lower the fed funds rate during shock events and/or economic downturns to encourage borrowing, which can lead to corporate hiring, acquisitions, and innovation -- i.e., catalysts that can drive corporate growth and consumption. Thus far, Fed Chair Jerome Powell has balked at Trump's stern requests to lower the fed funds rate, with some media outlets suggesting the president may "fire" the central bank chief. But can Powell actually be fired? Truth be told, no one knows with 100% certainty, because there's no historical precedent to such an act, nor any legal clarity. Although the Federal Reserve Act of 1913 allows members of its Board of Governors to be "removed for cause by the president," there's no definition of what justifies cause. The assumption would be that Trump's administration would have to prove Powell neglected his duties as Fed Chair or was somehow negligent and caused irreparable harm to the U.S. economy. It's a tall order for which no precedent exists. Furthermore, a ruling from the Supreme Court in May intimates that America's highest court views members of the Board of Governors as having unique protections. Specifically, the Supreme Court ruling noted, "The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical traditional of the First and Second Banks of the United States." Without justifiable cause, it would appear Donald Trump has little chance of removing Powell from office prior to the end of his four-year term as Fed Chair in May 2026. But what if I told you this Wall Street showdown has likely been decided -- and it has absolutely nothing to do with the legality of whether or not Fed Chair Powell can be fired? President Trump's tariff policy has made this battle a moot point While all eyes are on interest rates, the foundation of this rivalry between Donald Trump and Jerome Powell boils down to inflation. The key inflationary measure here is the Consumer Price Index for All Urban Consumers (CPI-U), which takes into account more than 200 specific spending categories, each of which has its own unique percentage weighting. These percentage weightings allow the CPI-U to be expressed as a single figure each month, which makes it incredibly easy to decipher if prices are, collectively, rising (inflation) or falling (deflation) on a month-to-month or year-over-year basis. While there's some level of subjectivity introduced by the Fed when making its interest rate decisions, there's more of an impetus to reduce the fed funds rate when the prevailing rate of inflation is declining. Traditionally, the Fed has targeted an arbitrary long-term inflation rate of 2%. Although the prevailing inflation rate has come way down from a peak of 9.1% on a trailing-12-month basis in 2022, it's still above the central bank's long-term target of 2%. More importantly, inflation appears to be reaccelerating due to the implementation of Donald Trump's tariff and trade policy. On April 2, Trump unveiled a 10% base global tariff, as well as introduced aforementioned reciprocal tariffs on dozens of countries that have historically run adverse trade imbalances with America. With the president pausing and/or adjusting these reciprocal tariff rates on numerous occasions since his initial announcement, there's been a bit of lag in determining whether or not these tariffs are having an inflationary impact. Following the release of the June inflation report from the U.S. Bureau of Labor Statistics, it's pretty evident that Trump's tariff and trade policy is providing upward pressure on prices. Between May 2025 and June 2025, the trailing-12-month CPI-U inflation rate jumped by 32 basis points to 2.67%. Core inflation, which excludes volatile food and energy costs, climbed to 2.9%. This represents the fastest uptick in core inflation since February 2025. In other words, Trump's tariff and trade policy looks to be ending this Wall Street face-off before it has a chance to ramp up. The June inflation data strongly suggests there's no immediate catalyst to lower the fed funds rate. The uncertainty created by Trump's tariffs, including the lack of differentiation between input and output tariffs, which threatens to further drive up the prevailing rate of inflation, implies that pricing pressures will persist for the foreseeable future. The narrative investors should be monitoring isn't whether or not the Fed's monetary policy is hindering corporate growth. Rather, it's whether Trump's tariffs will adversely impact corporate hiring, labor productivity, sales, and profits as they did when the president implemented tariffs on China in 2018 to 2019. Last week, the S&P 500 hit its third-priciest valuation during a continuous bull market when back-tested 154 years (based on the Shiller price-to-earnings ratio), which means there's virtually no margin for error on Wall Street. With more businesses alluding to tariff-related uncertainty in their sale and profit forecasts, it's crystal clear that attention needs to be paid to the inflationary impact(s) of Trump's tariff policy on Wall Street's most influential companies. Should you invest $1,000 in S&P 500 Index right now? Before you buy stock in S&P 500 Index, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and S&P 500 Index wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025 Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Wall Street's Biggest Showdown -- Donald Trump vs. Jerome Powell -- Has Likely Already Been Decided but Not for the Reason You Might Think was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
