Buy UK: City stocks set for boost from Trump’s trade war with EU
As the chaos around President Donald Trump’s erratic tariff agenda shows no sign of abating, brokers have thrown their weight behind UK stocks.
Just this weekend, Trump threatened escalations with Mexico and the EU before slapping a 30 per cent levy on the 27-state bloc from August 1.
But among the geopolitical noise, the UK has found itself uniquely positioned after agreeing a trade deal with the US in May.
The deal, touted as “excellent” by Bank of England Governor Andrew Bailey and “good for living standards” by Chancellor Rachel Reeves, eases tariffs on steel, aluminium and motors.
Joachim Klement, investment strategist at Panmure Liberum, said: “As the world stands today, there is one clear recommendation: Buy UK.”
The endorsement of UK assets came as the FTSE 100 sealed another record closing high on Monday after jumping 0.6 per cent to 8,998.06. Meanwhile, Europe felt the sting of Trump’s latest tariff threat with Germany’s Dax falling 0.4 per cent, Cac 40 in Paris nearly 0.3 per cent and Amsterdam’s AEX over 0.1 per cent.
Trump’s continuous bait-and-switch on trade policy has led to markets coining the term TACO trade – ‘Trump Always Chickens Out.’
But Panmure Liberum analysts warned: “While Trump cannot be taken literally, we think he still needs to be taken seriously”.
Klement warned the EU will face “many obstacles” to getting a trade deal secured, with worries “all the talk about TACO has pushed Trump into a corner where he needs to make an example of at least one, if not several major trading partners”.
The trade tensions between the US and EU are set to open opportunities for the UK.
“UK stocks should outperform European peers because thanks to the trade deal between the US and UK, trade uncertainty is much lower for UK businesses,” Klement said, adding that the expected longevity of tariffs would forge “arbitrage opportunity for European business to divert exports to the US via the UK, creating a large need for investments in the UK in the next three to five years”.
US exceptionalism crumbles as recession fears rise
The gushing endorsement follows Steven Fine, chief executive of investment bank Peel Hunt, telling City PM investors departing from US assets was leading to “excess concentration” providing a positive “potential for change and impact” on the UK.
John Ions, chief executive of asset manager Liontrust, also previously told City PM the period of “US exceptionalism” was fading as Trump’s tariff onslaught led to “investors looking to move away from the US”.
Klement said the imposition of 30 per cent tariffs on the EU and Mexico would “almost certainly” send the US into recession in 2026 and cause inflation to top four per cent.
Trump sent global markets into a tailspin in March after refusing to dismiss recession fears, instead declaring the US was going through a “period of transition”.
Analysts tied the market woes directly to the White House rhetoric as the President drove investor volatility.
But in the last month investors have begun to call Trump’s bluff as his TACO branding caught wind.
The FTSE 100 surpassed an all-time high on Thursday, closing at 8,975.66 after investors shrugged off Trump’s barrage of letters to trading partners shared on Truth Social.