Category: government and politics government and politics
government and politicsUS President Donald Trump is currently locked in an intense struggle against the Supreme Court of the United States over his controversial trade tariffs. How might the UK economy – specifically the mortgage market – fare in the aftermath of this?
Background
Since his early presidency, Trump has set an agenda to impose large tariffs on foreign trade to the US. This is part of his overarching goal to increase productivity within the country.
In April 2025, he announced his baseline 10% “Liberation Day” tariffs on nearly every country – though several nations were met with even harsher tolls.
The threat of these tariffs has been a source of incredible anxiety for governments, economists and average people around the world.
If they were to be fully implemented, Trump’s tariffs would heavily tax all products exported to the US, and therefore exert pressure on global inflation. Economists expected mortgage costs to increase in many countries.
In response to the Liberation Day tariffs, several major corporations opted to sue the Trump administration in the US Court of International Trade and the Federal courts.
When he first signed off these tariffs, Trump invoked the International Emergency Economic Powers Act (IEEPA).
As the name implies, this can only be used in extraordinary emergencies, such as when the US is under severe and immediate threat from foreign powers. George W. Bush previously used IEEPA to block assets of terrorist organisations.
After consolidating the lawsuits, on 20th February 2026, the Supreme Court decreed that Trump had no authority to impose these punitive tariffs.
The Supreme Court declared that there is no legal basis for the “unconstitutional” tariffs, with there being no emergency situations severe enough to warrant them.
Trump’s tug-of-war
This landmark ruling by the Supreme Court was met with praise by many international politicians. But, as expected, Trump did not take the result well, calling it “extraordinarily anti-American”.
On 21st February 2026, Trump retaliated with an announcement that – regardless of the Supreme Court’s decision – he will raise international tariffs even further, to 15%.
It is currently unclear how the Trump administration can practically enforce this, but the announcement has sent shockwaves around the world.
Trump has now attempted to invoke Section 122 of the Trade Act of 1974, which allows the US president to raise tariffs by up to 15% in response to “large and serious” payment deficits in international transactions, but only for 150 days – unless the US Congress agrees to extend this deadline.
Section 122 is more obscure than IEEPA, since no president has used it before.
Impact on UK economy
The UK occupies a fragile position in the middle of Trump’s tariff crusade. Due to the long-standing “special relationship” between the US and UK, it was expected that Trump would make some concessions to the UK, even if other countries were not so lucky.
So far, however, Trump has not offered leeway to any country. Therefore, businesses and economists are currently working on the assumption that the UK could be faced with 15% tariffs like everywhere else, unless Trump clarifies otherwise.
The Supreme Court ruling may hold firm against Trump’s invocation of Section 122. Trump has also been known to back-peddle after making bold, sweeping statements.
Nonetheless, this tug-of-war match between the US government and Supreme Court has only caused global economic uncertainty to rise.
The British Chamber of Commerce was not enthusiastic about the Supreme Court ruling, as they correctly predicted that Trump would search for another law to get around it. A spokesperson said that this situation “does little to clear the murky waters for business”.
The Base Rate and mortgage markets
Andrew Bailey, governor of the Bank of England (BoE), has not directly commented on the situation in the US at the time of writing.
After Trump’s announcement, Bailey told business leaders at a Belfast Chamber event that he expects UK inflation to return to the BoE’s 2% target from April onwards.
The Monetary Policy Committee (MPC), the chair of nine that make all the BoE Base Rate decisions, has been focused on bringing down inflation. Their strategy involved making periodic cuts to the Base Rate.
While the Base Rate is influential, it is not the primary factor that mortgage lenders consider when they make decisions about their product ranges.
They instead look at Swap Rates, which reflect expectations the money markets have for future interest rates. As such, most lenders already ‘price in’ expected changes several weeks before a potential Base Rate update is officially announced.
It is possible that the BoE board members are carefully processing the tariff situation and figuring out the best course of action, which could explain why Bailey has not said anything definitive yet.
Since the COVID-19 pandemic, the BoE has keenly stress-tested major banks and building societies, in order to improve resilience against unexpected upheavals that could destabilise the UK economy. Rapid inflation increases caused by international tensions are the kinds of scenarios that the BoE has prepared against.
It is unknown how the MPC could adjust their inflation-curbing strategy in light of this information. Currently, the mortgage market is stable, without widespread cuts or increases in rates. There have been no major shifts in Swap Rates.
That stability may not last, which is why landlords approaching renewal or buying a property may be wise to secure a good mortgage deal sooner rather than later. Contact our team of advisors to discuss the available options.
This political situation is very volatile and the long-term impacts may not be fully understood for some time. We will keep you closely updated on how it progresses.