UK doesn’t need to ‘escalate’ Donald Trump’s commerce wars, says Rachel Reeves

Chancellor Rachel Reeves has mentioned the UK doesn’t need to “escalate” Donald Trump’s commerce wars after the US president slapped a brand new 25% tariff on all imported vehicles.

Mr Trump signed an government order final night time for the tax to kick in on 2 April – what he has referred to as “liberation day”.

The transfer ratchets up the worldwide commerce warfare Mr Trump promised he would ignite upon coming into the White Home.

However talking to Wilfred Frost on Sky Information Breakfast, the chancellor sought to diffuse the looming battle when requested if the UK supposed to reply.

She mentioned: “We’re not in the mean time able the place we need to do something to escalate these commerce wars.

“Commerce wars are not any good for anybody. It is going to find yourself with increased costs for customers pushing up inflation after we have labored so laborious to get a grip of inflation, and on the identical time, will make it more durable for British firms to export.

“So look, we need to safe a greater buying and selling relationship with the USA. I recognise that the week forward is vital.

“There are additional talks happening at the moment, so let’s have a look at the place we get to within the subsequent few days.”

The chancellor’s reply does go away the door open to the UK probably responding to the US president’s actions, which dangers a huge effect for the UK’s automobile trade together with producers similar to Jaguar Land Rover, Aston Martin and Rolls-Royce.

Nonetheless, the UK authorities has sought to take care of a optimistic relationship with Mr Trump in a bid to keep away from additional punitive tariffs that he maintains are essential to develop the US economic system by boosting home manufacturing and defending jobs.

The US president has already imposed tariffs on all metal and aluminium imports to the US, which got here into impact on 12 March.

The transfer has affected UK merchandise price lots of of hundreds of thousands of kilos.

Whereas the European Union has introduced it would impose retaliatory tariffs on the US, UK ministers have solely mentioned they’re “disenchanted” to see the tariffs on metal and aluminium and that “all choices are on the desk”.

Enterprise Secretary Jonathan Reynolds beforehand mentioned there could be no rapid retaliation by the UK authorities as negotiations proceed over a wider commerce cope with the US.

A profitable commerce cope with the US is all of the extra pertinent for Ms Reeves after she admitted throughout her spring assertion that the Workplace for Funds Accountability (OBR) had halved the UK development forecast for 2025 from 2% to 1%.

Nonetheless, the fiscal watchdog mentioned that whereas development had been downgraded for this 12 months, it had been upgraded for yearly after for the remainder of this parliament – which is because of finish in 2029.

Residing requirements, as measured by family disposable earnings, will fall after this 12 months to virtually no development in 2027-28 earlier than rising once more resulting from companies rebuilding revenue margins, wage development slowing, taxes rising, and welfare measures taking impact.

Learn extra:
Spring assertion 2025 key takeaways
What are Donald Trump’s tariffs – and the way will they have an effect on the UK?

The chancellor mentioned yesterday that she was “not happy with the numbers” for this 12 months.

In the course of the assertion, Ms Reeves mentioned she had restored the federal government’s £9.9bn fiscal “headroom” – the room she has to spend cash earlier than she breaks her fiscal guidelines.

Nonetheless, the OBR has warned this might simply be jeopardised by world occasions.

“If world commerce disputes escalate to incorporate 20 proportion level rises in tariffs between the USA and the remainder of the world, this might scale back UK GDP by a peak of 1% and scale back the present surplus within the goal 12 months to virtually zero.,” it warned yesterday.