Client Update - 8th August 2025

US President Donald Trump has continued his self-proclaimed success as tariffs on countries he has yet to “do a deal” with kicked in once more and his “Big Beautiful Bill” (please!) has been passed into motion. Even the hardiest of doubters have relented a little to acknowledge that Trump has got much of what he wanted without, yet disturbing stock markets other than a few bumps in the road. Can this continue?

It is safe to say that the real inflationary impact of the tariffs has yet to be seen in the US, as high prices will surely lead to inflation rising once more. It was clear with the defeat of Kamala Harris last year that voters in the US wanted something different to another four years of Bidenomics, and it is therefore likely that the middle US voters who were undecided but chose to give Trump a chance, will get equally bored of him and his methods come the mid-term elections next year.

There are other reasons to suspect that we are in the early stages of a shift against Trump. The Jeffrey Epstein issues of recent weeks. The signs of age in a president nearing 80. The electoral timetable that requires Republicans with ambitions for 2028 to start making moves next year that could start to split the Republican party.

Back home and I am not sure I can quite bring myself to comment on the new £50bn black hole in the UK finances that the National Institute for Economic and Social Research reported on Wednesday. This has stoked more worry about tax rises in the Autumn Budget. Even though you struggle to work out who Kier Starmer is referring to, this doesn’t sound good for the average worker in the UK, and probably brings further focus on reduction in tax reliefs, such as that currently offered on pension contributions and indeed the age at which you can take your state pension looks like it will be pushed further back.

Company directors are certainly worried, with it being reported this week in the FT that 3,790 directors had left the UK since the 2024 Budget, compared to 2,717 the previous year. Italy has become a popular location after the government introduced a €200,000 flat tax on foreign income that allows new arrivals to escape inheritance tax on foreign assets.

In an effort to support the economy, the Bank of England cut interest rates yesterday by 0.25%, as the Bank remains split on its view of weak employment and wage growth, versus persistent inflation. If taxes are to rise, this would be seen as deflationary as spending should slow, however the Bank had previously made it clear that it will not speculate on announcements from the Treasury before they come into effect.

What is clear is that markets and economies have become quite dislocated and whilst economic news has started to disappoint, stock markets have continued to make ground in 2025. There is no denying that Trump’s new bill, that permanently extends his 2017 tax cuts and boosts expenditure and cuts regulation, is supportive to stock markets. There is also the prospect of lower borrowing costs to come in the next year if inflation can be reigned back. All reasons to be hopeful, even if the front pages of the papers are dominated by gloomy economic outlooks. Do have a good weekend.