Why Donald Trump's US election win could impact mortgage and interest rates in the UK

The US Presidential election has been won by Donald Trump and it could bear significance for us in the UK too. The outcome's geopolitical repercussions have the potential to create ripples worldwide, including the possibility of influencing our personal finances.

Some economists suggest a Trump win could result in a reduced US gross domestic product (GDP) and increased inflation due to his policies on higher import tariffs and restricted immigration.

Paul Dales from Capital Economics has been quoted in the i newspaper explaining that the US Federal Reserve's funds rate would likely be 0.5 percentage points higher under Trump's victory. He remarked: "That would put some upward pressure on UK gilt yields and mean mortgage rates for UK households are a bit higher than otherwise. A more inflationary global environment may mean the Bank of England cuts interest rates by less than otherwise."

Reduced rate cuts by the Bank of England would likely translate into sustained higher mortgage rates domestically. Peel Hunt, an investment bank, has issued a note discussing the potential impact of the US election on UK stock markets and companies.

This is significant for many people in the UK, whether they own shares directly, through an ISA, or via their pension when it's invested in equities, reports the Mirror. The fallout from companies negatively impacted could also affect jobs and wages.

Peel Hunt previously said that regardless of whether Harris or Trump won, their policies would have "far-reaching consequences for the global economy and financial markets. "

They believe that the candidates' policies overall "involve a series of anti-growth measures that – if enacted - could impair US economic performance and create risks for financial markets." They add: "While certain policy proposals could provide some upside for certain sectors, on balance, both candidates propose a series of anti-growth measures that – if enacted - could impair US economic performance."

As the old adage goes, when the US sneezes, the world catches a cold. This could potentially impact global economic growth, including that of the UK. One policy that has been highlighted is Mr Trump's threat to impose tariffs on imported goods to the US. Among individual equities, Peel Hunt's analysts have identified several that could be impacted by such tariffs.

These include Nottingham-based Games Workshop, with the US accounting for around 40% of its sales: "Trump tariffs on imports would affect the cost of goods into the US, but we would expect these to be passed on to consumers", said Peel Hunt.

Another company that could be affected is upmarket drinks mixer maker Fevertree, with the US being its largest region by revenue, generating 32% of group sales. Currently, about 70% of its products are made in the UK and imported to the US. "A 20% tariff on imports is likely to have a notable impact", concluded the note.

Tariffs could also impact companies in the transportation sector, including British Airways owner IAG, where Trans-Atlantic routes are "highly significant." The report continues: "Tariffs may pose a significant problem for Ryanair and Wizz Air.

Currently, tariffs between the EU and US are suspended for large civil aircraft until 2026, which effectively exempts Airbus and Boeing airframes and engines made in either region. This suspension may end earlier under retaliatory tariffs.

Jet fuel is priced in US dollars, so any negative currency reaction to the election result would push up airlines' costs. As Peel Hunt says: "Decarbonisation policy has emerged as a top election issue in the US. " Trump's victory could lead to a loosening of climate targets, although even the Democrats may have to slim down their climate commitments given the fiscal and debt challenges that have become increasingly pronounced across major economies. This, in turn, could prolong the dominance of oil and gas in the energy mix, as the build-out of renewable energy and low-carbon alternatives may lag behind government targets."