Chancellor Rachel Reeves has said the UK does not want to “escalate” Donald Trump’s trade wars after the US president slapped a new 25% tariff on all imported cars.
Mr Trump signed an executive order last night for the tax to kick in on 2 April – what he has called “liberation day”.
The move ratchets up the global trade war Mr Trump promised he would ignite upon entering the White House.
But speaking to Wilfred Frost on Sky News Breakfast, the chancellor sought to diffuse the looming conflict when asked if the UK intended to respond.
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She said: “We’re not at the moment in a position where we want to do anything to escalate these trade wars.
“Trade wars are no good for anyone. It will end up with higher prices for consumers pushing up inflation after we’ve worked so hard to get a grip of inflation, and at the same time, will make it harder for British companies to export.
“So look, we are looking to secure a better trading relationship with the United States. I recognise that the week ahead is important.
“There are further talks going on today, so let’s see where we get to in the next few days.”
The chancellor’s answer does leave the door open to the UK potentially responding to the US president’s actions, which risks a huge impact for the UK’s car industry including manufacturers such as Jaguar Land Rover, Aston Martin and Rolls-Royce.
However, the UK government has sought to maintain a positive relationship with Mr Trump in a bid to avoid further punitive tariffs that he maintains are necessary to grow the US economy by boosting domestic manufacturing and protecting jobs.
The US president has already imposed tariffs on all steel and aluminium imports to the US, which came into effect on 12 March.
The move has affected UK products worth hundreds of millions of pounds.
While the European Union has announced it will impose retaliatory tariffs on the US, UK ministers have only said they are “disappointed” to see the tariffs on steel and aluminium and that “all options are on the table”.
Business Secretary Jonathan Reynolds previously said there would be no immediate retaliation by the UK government as negotiations continue over a wider trade deal with the US.
A lucrative trade deal with the US is all the more pertinent for Ms Reeves after she admitted during her spring statement that the Office for Budget Responsibility (OBR) had halved the UK growth forecast for 2025 from 2% to 1%.
However, the fiscal watchdog said that while growth had been downgraded for this year, it had been upgraded for every year after for the rest of this parliament – which is due to end in 2029.
Living standards, as measured by household disposable income, will fall after this year to almost no growth in 2027-28 before rising again due to firms rebuilding profit margins, wage growth slowing, taxes rising, and welfare measures taking effect.
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The chancellor said yesterday that she was “not satisfied with the numbers” for this year.
During the statement, Ms Reeves said she had restored the government’s £9.9bn fiscal “headroom” – the room she has to spend money before she breaks her fiscal rules.
However, the OBR has warned this could easily be jeopardised by global events.
“If global trade disputes escalate to include 20 percentage point rises in tariffs between the USA and the rest of the world, this could reduce UK GDP by a peak of 1% and reduce the current surplus in the target year to almost zero.,” it warned yesterday.
