Is the island going to suffer the indirect economic impacts of a “potential global recession” in the wake of new US tariffs, or will its financial services industry profit from a panic-driven shift of American wealth overseas? And what could the instability mean for some important infrastructure projects coming up soon?
Express takes a look at what the recent geopolitical turmoil could mean for Jersey, as well as its neighbouring island’s take on the situation…
A few weeks after the government said it was “carefully considering” the possible consequences of major announcements from across the Atlantic, External Relations Minister Ian Gorst has acknowledged that islanders could face rises in inflation and interest rates.
A “potential global recession”
US President Donald Trump’s new tariffs triggered chaos throughout financial markets shortly after being announced at the start of this month.
Volatility remains, despite a 90-day pause on some of the tariffs – and the prospect of an all-out trade war between America and China has continued to escalate.
During a hearing of the Corporate Services Scrutiny Panel on Friday, Deputy Gorst said the direct impact of the tariffs on Jersey’s economy was “reasonably small”, but acknowledged that the island could suffer from the indirect impacts of a “potential global recession”.
“That will largely be around the importation of high levels of inflation and then we will also see a follow-on, knock-on effect to interest rates as well,” he explained.
“We know in Jersey that those two things can have counterbalancing implications for public finances but also a more negative effect on the wider economy and people’s living standards.”
Impact on the ‘buffer’ pot
Treasury Minister Elaine Millar told scrutineers in the same session that the island’s financial ‘buffer’ pot – known as the Stabilisation Fund – were near-exhausted.
Successive governments have tended to try to make efforts to top up that money pot each year.
Deputy Millar said that the volatility in global markets means the Ministers might instead decide to retain any spare funds for contingency this year rather than transfer it to savings.
Hospital funding concerns
Financing Jersey’s new hospital may also be complicated as a result of changes in American policy.
New global minimum tax standards were expected to generate around £50m for the island each year over the coming years – and the government had hoped to be able to put nearly £70m of that towards the new hospital.
However, it has now emerged that revenue from what’s known as the ‘Pillar 2 international tax agreement‘ may only be temporary for 2025 as the US are asking for an overhaul of the system.
Deputy Gorst said that there was “a lot more negotiation and conversation to be had” as to whether this revenue stream would be “ongoing”.
He later added: “There will be effects on the public purse, which officials will need to respond to in thinking about those areas that that money was cautiously allocated to.
“We can’t stop building the hospital, we have to build a hospital for all the reasons we know [but] it does put pressure on officials and the rest of government to ensure that they can fund that borrowing for the hospital.”
Deputy Gorst confirmed that Government would not be looking to increase personal and business taxes to manage the situation in the meantime.
Deputy Helen Miles, who chairs the scrutiny panel, said it was “concerning” that the tax revenues “might not now materialise as expected”, which would in turn put pressure on public funds.
Pictured: Only shortly after the new £110m Fort Regent plans were unveiled, the Treasury Minister has now said we now may not be able to afford them.
“In addition, the Minister for Treasury and Resources confirmed we may not be able to afford to finance regeneration plans, which include Fort Regent, as money will need to be borrowed, in addition to the new hospital costs,” Deputy Miles said.
“There is certainly some potential here for Jersey to benefit”
However, the consequences of the new US tariffs and wider turmoil stemming from them might not be all bad news for Jersey.
It recently emerged that wealthy US residents could be looking to move their money overseas amid fears that they could face restrictions on doing so, with offshore accounts in the Channel Islands among their possible target destinations.
The chief executive of Jersey Finance, Joe Moynihan, said: “‘It is a bit premature to confirm significant fund transfers, though we continue to monitor developments and there is certainly some potential here for Jersey to benefit.”
He added: “In times of uncertainty and instability, institutions and private clients seek stable, well-regulated jurisdictions such as Jersey with long-standing expertise and the experience in managing global assets.”
Guernsey also eyeing US opportunities
Speaking at the promotional body’s 2025 Industry Update, Jonny Gamble outlined what made the island of interest to Americans.
“In the private world space, asset protection and succession planning have been a key interest for the intermediaries that I’ve been speaking to,” he said.
“Why? As here in Guernsey, we have structures that allow private individuals and families to manage their wealth, their investments and their philanthropic efforts. We have structures that allow them to have a range of control that suits a client’s needs.
“We have 60 years experience in setting up and managing these structures, and we have a range of service providers here in the audience who can deliver the service requirements that meet their clients needs.”
It was the same story in funds, said Mr Gamble.
“Let’s take private equity and venture capitalism. What have I been seeing, and what makes Guernsey interesting to some of those US managers? Well, certainly it’s our access to international capital markets and our expertise in running structures.
“More importantly, different from our European and Caribbean competitors, we have a specific, bespoke model compared to the more cookie cutter model more present there. We can deliver bespoke structures very cost effectively for them to meet their needs.”
Timed well to potentially capitalise on the reported numbers of wealthy Americans looking to move money out of the country, Guernsey Finance is holding a ‘Miami Private Wealth Roadshow’ at the end of the month, and a forum in New York later in the year.