US tariffs: UK expects to be hit by Trump taxes this week, No10 admits
The UK expects to be hit by Donald Trump’s tariffs this week, No10 has said, amid frantic discussions to secure an exemption for UK businesses.
The government has been trying to negotiate to spare British exports from the taxes on imports into the US which are set to come into force later this week on what Trump has branded ‘Liberation Day’, claiming the tariffs will boost the US’ domestic economy.
The US president has announced a 25 per cent import tax will be imposed on all imported cars, which is set to hit British luxury car makers such as Aston Martin, on top of a series of tariffs set to take effect on April 2, which could include 20 per cent on all UK goods.
Speaking on Monday, the Prime Minister’s official spokesperson said: “When it comes to tariffs the Prime Minister has been clear he will always act in the national interest.
“We’ve been actively preparing for all eventualities ahead of the expected announcements from President Trump this week, which we would expect the UK to be impacted by alongside other countries.
“Our trade teams are continuing to have constructive discussions to agree a UK-US economic prosperity deal.
“But we will only do a deal which reflects this government’s mandate to deliver economic stability for the British people, and we will only act in the national interest.”
Asked if the government had given up on a deal being signed before Wednesday, the spokesman refused to “put a time frame on those discussions” but that they are “likely to continue beyond Wednesday” and that the UK will “take a calm and pragmatic approach”.
Starmer and Trump discussed the “productive negotiations” the two nations have had towards an economic deal in a phone call on Sunday, and agreed “talks will continue at pace this week”.
US tariffs could damage the government’s hopes of growing the economy, and would come into force just days after Chancellor Rachel Reeves unveiled public spending cuts – including to welfare – at the Spring Statement in a bid to shore up her narrow fiscal headroom.
Asked if the government would hold another Budget in the event of tariffs, the spokesman said the UK will “reserve the right” to respond “in a way that does protect British industry”.
He added: “We’ll obviously always take an approach that suits the British economy. We’ll have a budget in the autumn, and the OBR will obviously update the forecast at that point.”
Economists believe Trump’s sweeping tariffs could deteriorate the UK’s weak economic outlook if they do come into effect.
The consultancy Capital Economics predict that tariffs will weaken the pound by about 4 per cent this year while inflation could rise 0.5 per cent higher than previously expected.
Bank of England interest rate-setter Swati Dhingra has suggested that Trump’s tariffs will have less of an impact on price growth than many expect.
Pantheon Macroeconomics said that Trump’s tariffs will make the Monetary Policy Committee (MPC)’s decision in May “harder” but it has stuck by its prediction that interest rates will be cut.
The hit to GDP growth is the main concern, however.
The Office for Budget Responsibility (OBR), the independent fiscal watchdog, said after last week’s Spring Statement that tariffs could hold UK growth back by as much as one per cent in the scenario where Trump slaps 20 per cent tariffs on all goods imports.
Trump’s tariffs alone could destroy Rachel Reeves’ £9.9bn headroom, according to OBR chair Richard Hughes.
“The net result is that the Chancellor’s fiscal headroom is also almost wiped out by the fifth year of the forecast,” said Hughes.
Andrew Griffith, shadow business and trade secretary, said: “This news is potentially a hammer blow not just to British businesses and workers but to his own Chancellor whose creative accounting at the emergency budget fails to include the impact of tariffs.
“Labour claims talks with the US are going ‘well’. But, if this is what well looks like, I wouldn’t like to see what the opposite looks like.
“The Prime Minister has so far failed to come up with the goods, he needs to rekindle our US trade deal. This is just further proof that, when Labour negotiates, Britain loses.”