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How Donald Trump's inauguration will affect people living in the UK

Home> News> UK News

Updated 14:52 20 Jan 2025 GMTPublished 14:30 20 Jan 2025 GMT

How Donald Trump's inauguration will affect people living in the UK

Donald Trump will be sworn in as America’s 47th president today (20 January)

Anish Vij

Anish Vij

Whenever there is a presidential inauguration, it's always going to affect people living in the UK - along with the rest of the world.

With Donald Trump winning another term in the White House, he is set to become America’s 47th president when he is sworn in today (20 January).

The 78-year-old's first term came in 2017 and, this time around, he is promising 'a brand new day of American strength and prosperity, dignity and pride'.

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For Britain, however, you best expect there to be some changes.

Potential for higher taxes or lower public spending in the UK

iNews reports that has already been increased volatility in the financial markets following his election win last year - and that will affect us across the pond.

Lindsay James, investment strategist at Quilter Investors, said that concerns about rising inflation and interest rates in the US could cause government borrowing costs in the UK to rise.

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Ashley Webb, economist at Capital Economics, added: “We think Trump’s second term will result in faster US inflation and higher US interest rates, and that could spill over into higher UK gilt yields/borrowing costs.

“The rise in gilt yields has also raised the cost of borrowing for the Government. This may mean the Government will have to either increase taxes (which could hit households) or lower spending (which may mean worse public services).”

Higher inflation

Inflation around the world could go up when Trump gets into power, mainly because he is introducing tariffs on Chinese and world imports into America.

So if US inflation goes up, and the rest of the world impose tariffs on America, then inflation will go up for almost everyone.

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James added: “The combination of domestic fiscal policies and external factors, including Trump’s election, has led to heightened inflation expectations.

“The Bank of England has adjusted its inflation forecasts upward for the next three years, indicating a potential delay in anticipated rate cuts.”

Donald Trump is promising big changes when he becomes America’s 47th president (Rebecca Noble/Getty Images)
Donald Trump is promising big changes when he becomes America’s 47th president (Rebecca Noble/Getty Images)

Higher interest rates and higher mortgage rates

Stephen Millard of the National Institute of Economic and Social Research (NIESR) explained: “The main impact on households will be via interest rates. It is likely that the US Federal Deficit will increase as a result of Trump’s election."

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He also said the strengthening of the US dollar against the pound could lead to a ‘knock on effect on inflation.”

Millard added that Brits will likely feel this through either higher household bills or higher mortgage rates.

Rising prices in shops

If the dollar strengthens then you'll get less bang for your buck.

Combined with higher tariffs, consumer prices in the UK could increase.

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Thankfully, Britain's trade with America is largely on the service industry, so prices on the shelves aren't that likely to go up.

Damage to businesses

Given that the US was the single biggest market for UK traded goods in 2023, if Trump's tariffs would make it a lot more expensive to do business.

With higher tariffs, UK prices of items in the US are likely to rise, which would lessen the demand.

Equally, it could mean lower profit margins for British businesses.

Chancellor Rachel Reeves has said the UK will be making 'strong representations' to have a free trade relationship.

The inauguration is taking place today (20 January) (Kayla Bartkowski/Getty Images)
The inauguration is taking place today (20 January) (Kayla Bartkowski/Getty Images)

Holidays to America will be more expensive

Dan Coatsworth, investment analyst at AJ Bell, said the pound has 'weakened by 5.9 per cent against the US dollar', so anyone visiting the US will find their money doesn't go as far.

He added: “For example, £1 will buy you $1.2189 today versus $1.2954 on 5 November 2024 when the election was held. Someone buying £3,000 worth of dollars for their holiday will now get $3,656 excluding FX commission – that’s $230 less than on election day ($3,886), which is a substantial drop.”

Affect on pensions

If we take workplace pensions as an example, most have around 40 percent of their money tied up in US stocks and shares.

So if the US stock market stays volatile, your investments and future pension value could be affected - but it may not all be bad news.

Justin Onuekwusi, CIO at St James’s Place, said: “Given Trump’s focus on international negotiations, sectors tied to international trade – particularly tech and consumer goods – may experience more volatility.

"On the other hand, his emphasis on deregulation and corporate tax cuts could give short-term boosts to industries like traditional energy, financials, and defence.”

Savings rates

High interest rates are considered to be good for your savings because they mean savers earn more interest on their money.

That being said, if inflation is also high, the value of your savings may be reduced.

Featured Image Credit: Rebecca Noble/Getty Images/Kayla Bartkowski/Getty Images

Topics: Donald Trump, US News, UK News, Politics

Anish Vij
Anish Vij

Anish is a Journalist at LADbible Group and is a GG2 Young Journalist of the Year 2025. He has a Master's degree in Multimedia Journalism and a Bachelor's degree in International Business Management. Apart from that, his life revolves around the ‘Four F’s’ - family, friends, football and food. Email: [email protected]

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@Anish_Vij

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