US tariffs will clearly have economic impact, says Keir Starmer

Donald Trump’s tariffs will “clearly” have an economic impact on the UK and globally, Prime Minister Sir Keir Starmer has told business leaders in Downing Street.

On Wednesday, the US president announced taxes on goods coming into his country including 10% on all UK imports and 20% on those from the European Union.

Sir Keir said that “just as with defence and security” the world was “entering a new era” in economy and trade.

He said his government still hoped to secure a deal with the US but reiterated that nothing would be “off the table” when it came to the UK’s response to the tariffs.

“I want to be crystal clear – we are prepared. Indeed, one of the great strengths of this nation is our ability to keep a cool head.”

The UK has spent weeks working on a trade deal with the US to avoid the full impact of the level of tariffs introduced on countries such as Canada and China.

Asked on the Today programme if it was true that the UK had agreed a deal with US official but were awaiting sign-off from the president, Business Secretary Jonathan Reynolds replied: “That is not an inaccurate reflection.”

The US plan sets a baseline tariff on all imports of at least 10%, with items from countries that the White House described as the “worst offenders” facing far higher rates for what Trump said was payback for unfair trade policies.

His move breaks with decades of US policy embracing free trade. Analysts said it was likely to lead to higher prices in the US and slower growth around the world.

A Downing Street source told the BBC: “We don’t want any tariffs at all, but a lower levy than others vindicates our approach. It matters because the difference between 10% and 20% is thousands of jobs.”

But Conservative shadow home secretary Chris Philp said: “Dozens and dozens of countries have the 10% tariff, which is not based on any sort of negotiating genius by the government, it’s based on the USA’s assessment of our tariffs and other obstacles.”

Noting that UK car exports will still be “whacked” with a 25% tariff, he told Today that getting a free trade deal with the US “should be a priority” for the government, adding that it should also “make sure our domestic economy is better prepared to weather the storm that is clearly coming”.

The Conservatives are also claiming the UK has benefited from being outside the EU.

Shadow Trade Secretary Andrew Griffiths said: “The silver lining is that Brexit – which Labour ministers voted against no less than 48 times – means that we face far lower tariffs than the EU: a Brexit dividend that will have protected thousands of British jobs and businesses.”

Liberal Democrat leader Sir Ed Davey called for an “economic coalition of the willing” of countries to respond to the “appalling tariffs”.

He said the world should show “bully Trump that there are alternatives to trading with the US” by making deals with each other.

He also called for a specific tariff on Tesla cars, to “make sure Elon Musk feels the reaction to these appalling bullying tariffs”.

Reform UK chairman Zia Yusuf said Trump’s tariffs would drive big inflation in the US but were coupled with cuts to government spending and tax cuts.

In contrast, he said the UK would get the high inflation “but with no offsets”

“The risk of a fiscal event in the UK just got much, much more real. This country urgently needs competent leadership.”

The government’s official forecaster estimates a worst-case scenario trade war could reduce UK economic growth by 1% and wipe out the £9.9bn of economic headroom Chancellor Rachel Reeves gave herself at last week’s Spring Statement.

The UK exported almost £60bn worth of goods to the US last year, mainly machinery, cars and pharmaceuticals.

Inside government, officials hope that Wednesday’s announcement sets a “ceiling” on tariffs, not the final price, that can be talked down in negotiations.

The government’s approach has been backed in some of the early responses from the UK business sector.

The Confederation of British Industry (CBI) has said the government “has rightfully tried to negotiate a carve-out” and that businesses need a “measured and proportionate approach”.

The UK car industry, also hit with an additional 25% tax on all car imports to the US announced this week, called the tariffs “deeply disappointing”.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said the US announcement was “yet another challenge to a sector already facing multiple headwinds”.

Government sources believe talks between the US and the UK on a trade deal that could include reduced tariffs have made good progress.

The deal would be broader than just lower tariffs, focusing on technology, but also covering elements of trade in goods and services as well as agriculture – a controversial area in previous unsuccessful US-UK trade talks.

Chancellor Rachel Reeves has suggested the UK could change its taxes on big tech firms as part of a deal to overturn US tariffs.

The digital services tax, introduced in 2020, imposes a 2% levy on tech firms, including big US firms such as Amazon, bringing in about £800m in tax per year.