Why FTSE 100 investors should pay attention to the 'Day of Liberation'

In the United States, today (April 2) has been called 'Day of Liberation' by the current administration. The reference is to the probable rates that are scheduled to enter into force at midnight in a large number of nations that trade with the United States. Some friends who are investors from the United Kingdom focus on the Ftse 100 I have told myself that they are not too worried about what will happen today. Here is why I think they are wrong.

How the United Kingdom is affected

Perhaps the most obvious reason why the United Kingdom's stock market could be affected is that the United Kingdom is in the list of countries that are destined to impose rates. Although there have been diplomatic efforts, Prime Minister Keir Starmer has indicated that it is likely that the United Kingdom in front of these rates initially. In fact, the United Kingdom government is actively negotiating a commercial agreement. This could mitigate or reverse import levies. However, this may not come for some time.

Therefore, a probable 20% rate will be applied to all imports to the US. This would include approximately 60 billion in exports from the United Kingdom of a variety of sectors. The most affected are the automotive, aerospace industry, drinks and pharmaceutical products. Since FTSE 100 contains a large number of companies in these areas, the stock market could fall if President Donald Trump follows his promises.

To some extent, I think investors expect it to continue. But the market could still face volatility based on more comments from Trump at the end of this week. In the coming months, rates could really begin to bite if a trade agreement is not reached.

Where to be careful

Given the potential impact on FTSE 100, I am cautious about the actions with a great export exposure to the USA. For example, for example, Diageo (LSE: DGE). The price of the action has dropped 30% during the past year.

Although Diageo has some American production facilities, many of its key brands are imported from the United Kingdom and Ireland. In fact, from the data I can see, the United States generates about 35% of general income. If the United States proceeds with the imposition of tariffs on imported alcoholic beverages, the flagship flagship marks such as Johnnie Walker and Guinage It would become more expensive for American distributors and consumers.

There are even more potential problems that could arise. American consumers could pivot and buy more alcohol than competitors. In this way, it aggravates the problem for diageo. And, the company could see that costs increase even more if import rates extend to other products such as packaging and raw materials. The United Kingdom or the EU could retaliate with tariffs on US goods, causing even more interruptions for the company.

Although I stay away, I know I could be wrong in my opinion. The business recently received an analyst purchase qualification in Citigroup. The team pointed out that “The Diageo Profit Trajectory (and the broader spirits industry) is in the tendency towards stabilization/positive territory”. If earnings can be resistant despite problems, investors can look beyond the noise of rates and purchase based on improving finance.