Donald Trump will return to the White House today after one of the biggest political comebacks in American history.

His election victory in November has already had an impact on stocks, bonds and currencies after Trump put the US economy at the heart of his pitch for president.

He has vowed to “end to the devastating inflation crisis”, inflict tariffs on countries importing to the US and introduce big cuts to taxes.

So how will this all play out globally – and what impact will it have on the UK?

From interest rates to higher prices in shops, The i Paper spoke to experts to find out some of the ways that Trump’s presidency could impact your money.

Financial markets

The financial markets have exhibited increased volatility in response to Trump’s election victory.

Lindsay James, investment strategist at Quilter Investors, said: “Concerns about rising inflation and interest rates have led to bond market sell-offs, with yields reaching multi-year highs. This volatility extends to the UK, where government borrowing costs have risen.”

Government borrowing costs continued to rise after gilt yields rose to their highest level since 2008. UK government bonds – also known as gilts – saw 10-year yields hit fresh highs at 4.9 per cent as of last week.

The yield on 30-year gilts also hit new 27-year highs at 5.5 per cent at one stage in early trading on Monday (13 January) before easing back to settle at around 5.4 per cent.

There are concerns this could lead to higher taxes or spending cuts in the future.

Ashley Webb, economist at Capital Economics, said: “We think Trump’s second term will result in faster US inflation and higher US interest rates, and that could spill over into higher UK gilt yields/borrowing costs.

“The recent rise in gilt yields has been due to markets concluding that real interest rates need to be higher for longer everywhere to trim inflation.

“The rise in gilt yields has also raised the cost of borrowing for the Government. This may mean the Government will have to either increase taxes (which could hit households) or lower spending (which may mean worse public services).”

Higher gilt yields that push up government borrowing costs are major concern for the Chancellor, as it has effectively wiped out the limited fiscal headroom she thought she had at the time of the Budget.

Jason Holland of Evelyn Partners, said: “The UK Government could be faced with tough choices over the coming months and may be required to cut spending or double down and raise taxes further.

“With the UK tax burden already at the highest levels since the second world war, further tax rises would be very painful for households and businesses.”

Higher inflation

There are concerns that Trump’s election as President could cause higher inflation around the world – including in the UK.

One reason for this is Trump saying he will authorise additional tariffs on Chinese and world imports to the US.

As a result, US inflation will likely rise. If other countries decide to impose higher tariffs on US imports in response, world inflation will rise including in the UK. Higher inflation means household wages will not stretch as far.

Tariffs can disrupt supply chains, elevate costs, and introduce market uncertainties, potentially dampening economic growth prospects.

Ms James added: “The combination of domestic fiscal policies and external factors, including Trump’s election, has led to heightened inflation expectations.

“The Bank of England has adjusted its inflation forecasts upward for the next three years, indicating a potential delay in anticipated rate cuts.”

This has an impact on investors who worry that Trump’s trade policies – for example, potentially large tariffs on imports – could mean inflation being more persistent than previously thought.

High inflation means the purchasing power on the interest from a bond is eroded. To compensate for this, investors often demand higher yields.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “UK investors should brace for some volatile patterns of trading on the financial markets. However, it’s important to remember that investing takes endurance and patience and that the stock market has historically risen over the long term. There have been and will continue to be plenty of ups and downs along the way.”

Higher interest rates

Sticky inflation was one reason given for the Bank’s Monetary Policy Committee (MPC) choosing to leave interest rates at 4.75 per cent in December.

Stephen Millard of the National Institute of Economic and Social Research (NIESR) said: “The main impact on households will be via interest rates. It is likely that the US Federal Deficit will increase as a result of Trump’s election.

“The other major effect is coming through the appreciation of the US dollar. With the dollar appreciating, our imports – particularly those from the US and those, such as oil, priced in US dollars – will become more expensive. This will have a ‘knock on’ effect on inflation.”

“Either the MPC will accommodate the rise in inflation (which would likely be temporary) and households would feel the effects through higher household bills, or the MPC will respond with higher interest rates, in which case the main effect on households would come through mortgages.”

Mortgages

Higher interest rates translate into higher mortgage rates, piling more pain on homeowners who have been dealing with a tumultuous market over the past year.

Rates have started to rise on the back of a worsening economy, with average two-year and five-year fixed deals – for those with 25 per cent equity or deposit – now expected to rise above 5 per cent in the coming weeks, according to predictions from Capital Economics.

Although some lenders are still cutting rates, other major providers including the Co-op and HSBC are increasing theirs.

The average two-year fixed rate is 5.52 per cent whilst the average five year is 5.30 per cent, according to Moneyfacts.

Damage to businesses

If tariffs were imposed on UK exports to the US, it could damage the UK’s overseas sales and business sentiment.

In 2023, the US was the single biggest market for UK traded goods, purchasing £60.4bn of products, approximately 15 per cent of UK goods exports, or around 2.5 per cent of Gross Domestic Product (GDP).

Higher tariffs could lower company profit margins whilst prices of UK items in America may rise, which will likely result in weaker demand. Another suggestion is that UK firms could move overseas to avoid tariffs, removing businesses from the UK.

Chancellor Rachel Reeves has said the UK will be making “strong representations” to the Trump administration, making the case for free trade.

Higher prices in shops

Many imports used in an array of goods which are bought on wholesale markets are priced in dollars, which will be more expensive if the dollar strengthens. This could push up the prices of an array of some products on the shelves.

If countries hit back with tariffs on imports from the US, that could also push up consumer prices. The risks of that happening in the UK are low, particularly given that Britain’s trade with America is focused on services, where tariffs are unlikely to be imposed.

Pensions

Experts say that Trump’s focus on deregulation in the sector is likely to have a short-term positive impact on some US stocks.

Many people in the UK may find their own investments – for example their stocks and shares ISA accounts or their pension funds – have significant exposure to the US.

Workplace pensions, for example, often have 40 per cent or more of their members’ money in US stocks.

Justin Onuekwusi, CIO at St James’s Place, said: “Given Trump’s focus on international negotiations, sectors tied to international trade – particularly tech and consumer goods – may experience more volatility. On the other hand, his emphasis on deregulation and corporate tax cuts could give short-term boosts to industries like traditional energy, financials, and defence.”

However, most investments – particularly pensions – are made over a long-term period, and investors are being told not to make rash decisions based on short-term movement.

Weaker pound 

A higher path for interest rates in the US relative to the UK may result in a weaker pound. That may mean the pound won’t stretch as far for UK households travelling overseas (particularly to the US).

Travellers can protect themselves against some volatility by locking in rates ahead of travelling or using fee-free cards abroad.

Dan Coatsworth, investment analyst at AJ Bell, said: “The pound has weakened by 5.9 per cent against the US dollar since the election, meaning UK holidaymakers going to the US will find their money doesn’t go as far.

“For example, £1 will buy you $1.2189 today versus $1.2954 on 5 November 2024 when the election was held. Someone buying £3,000 worth of dollars for their holiday will now get $3,656 excluding FX commission – that’s $230 less than on election day ($3,886), which is a substantial drop.”

Savings rates

The better savings rates being offered may stay for a big longer, if interest rates remain higher, but they will likely disappear once policymakers vote for a rate reduction, so it’s worth locking into a good deal sooner rather than later.

Defence spending

The president-elect has been critical about the way Nato has been funded and has demanded other members start allocating much bigger parts of their budgets to defence. As president, it’s likely these calls will intensify and, unless they are met, there is the risk that the core commitment to the principle of collective security could be diluted.

It’s likely that defence spending will be increased across the Nato alliance, which is set to benefit companies with continuing military contracts. Listed aerospace stocks are among those that might benefit from a fresh round of investment into bolstering armed forces.