FTSE 100 Live: Stocks set to dip after Trump’s fresh tariffs salvo

British businesses barely had time to exhale. On Friday, FTSE 100 stocks rallied after the US Supreme Court struck down President Trump's 'Liberation Day' tariffs, finding his legal authority invalid. Within 24 hours, Trump had invoked emergency legislation to not only reinstate the levies but raise them — stripping the UK of its preferential 10 per cent rate and imposing a uniform 15 per cent tariff on all trading partners.

The reversal marks more than a diplomatic setback. It represents a fundamental challenge to corporate planning for any British firm with US exposure: how do you make investment decisions, negotiate contracts, or price products when the tariff regime can flip twice before Monday morning coffee?

When the Supreme Court doesn't matter

The constitutional theatre here deserves attention. A Supreme Court ruling typically represents the final word on executive authority. The Court found Trump's initial legal foundation for the tariffs invalid — a rare judicial check on presidential trade powers that should have ended the matter.

Instead, Trump bypassed the ruling within a day by invoking emergency legislation. The move was legally available, certainly. But it demonstrates that judicial constraints on trade policy amount to little more than a speed bump when alternative statutory authority exists.

Countries that negotiated better treatment ended up punished for their efforts. That's unlikely to encourage future trade diplomacy.

What's particularly ironic is that the emergency legislation Trump deployed requires non-discriminatory application across trading partners. This technical requirement — designed to prevent favouritism — meant the UK's preferential rate had to be eliminated. Sources familiar with the matter indicate high-level discussions are ongoing between Downing Street and Washington. Whether those conversations produce anything beyond platitudes remains unclear.

The volatility tax

Tariffs themselves are costly. British exporters face a 50 per cent increase in their baseline tariff rate compared to what they believed was locked in. For sectors with thin margins — automotive parts, pharmaceuticals, specialised manufacturing — that's the difference between viability and retreat.

But the deeper cost is the volatility itself. Call it the uncertainty tax.

Companies that paused US investment plans after Liberation Day now face a different calculus. Firms that accelerated orders to beat the initial tariffs may have acted prematurely. Finance directors pricing long-term contracts cannot build in assumptions about tariff rates that might change between proposal and delivery.

Building a corporate strategy on the assumption that the US president will backtrack is hardly sound planning. Yet that's where we are.

This isn't about whether British businesses can adapt to higher costs. They can and will, through price increases, margin compression, or shifting production. The question is whether they can operate effectively when the policy foundation shifts every 48 hours.

Market participants have developed informal terminology for this pattern. Some traders refer to 'TACO' — Trump Always Chickens Out — to describe the president's tendency to reverse course on trade policy. The theory holds that inflammatory announcements eventually give way to partial rollbacks once economic or political pressure builds.

What UK firms face next

British exporters with significant US exposure now confront several unappealing options. They can absorb the 15 per cent tariff and sacrifice margin. They can pass costs to American customers and risk losing market share. Or they can reconfigure supply chains to minimise cross-border shipments — an expensive proposition with no guarantee that new arrangements won't be upended by the next policy reversal.

Larger corporations with resources for scenario planning and hedging strategies will fare better than mid-sized exporters operating on tighter timeframes and budgets. The latter group faces genuine strategic paralysis.

What's particularly concerning for the UK economy is the timing. British growth forecasts for 2025 were already modest, hovering around 1 per cent according to recent Bank of England projections. Export-driven sectors represented one of the few bright spots. Sustained US tariff uncertainty doesn't just threaten those sectors — it creates a drag on business investment more broadly.

Why commit capital when the regulatory and tariff environment might be entirely different in a fortnight?

Treasury officials and the Bank of England will be watching corporate investment data closely in coming months. If firms begin deferring major decisions due to trade policy unpredictability, the economic impact extends well beyond the exporters directly affected by tariffs.

The bilateral relationship between London and Washington has weathered trade tensions before. What's different this time is the velocity of change. Previous disputes unfolded over months, allowing businesses to adjust. The current environment offers no such luxury.

British firms now face the prospect of planning for multiple simultaneous scenarios: tariffs stay at 15 per cent, they increase further, they decrease through negotiation, or they disappear entirely in another reversal. Resource-intensive doesn't begin to describe it.

Whether Trump delivers another policy reversal — cooking up another batch of TACOs, as the informal market terminology goes — remains unknowable. But that's rather the point. Unknowable isn't a viable foundation for international commerce.