UK remains cool under pressure as Trump tariffs challenge trade ties
The UK government does not intend to retaliate and is continuing its efforts to secure a trade deal with the United States, despite President Donald Trump imposing a 10% tariff on all British goods. London is adopting a strategy of calm negotiations.
The tariffs imposed on the UK are lower than those implemented on the European Union (20%), China (34%), or Vietnam (46%). The difference between the 10% and 20% rates could mean saving thousands of jobs, according to a representative of the British government. Business and Trade Secretary Jonathan Reynolds emphasised in a statement that the United Kingdom's "approach is to remain calm and committed to doing this deal, which we hope will mitigate the impact of what has been announced today."
President Trump described the imposed tariffs as "Liberation Day" for his country. He stated that 10% is the "minimum basis" for all countries, and the rate for the UK matches what British authorities levy on products from the USA, according to American administration calculations. Some countries received "discounted" rates.
For Prime Minister Keir Starmer, whose Labour Party came to power with a promise to stimulate economic growth, the imposed tariffs pose a significant challenge. For weeks, the British government has been working on obtaining an exemption from American tariffs. According to estimates from Capital Economics, the 10% tariffs could reduce the UK GDP by 0.01-0.06%, and the indirect effects of changes in global trade flows could further decrease economic output by 0.01-0.13%.
The global consequences of Trump's trade policy
Chancellor of the Exchequer Rachel Reeves warned that even if the UK secures a deal excluding British exports from US tariffs, the country will still feel the global consequences of Trump's trade policy. During her appearance before a parliamentary committee, Reeves stated that "the specific tariffs on the UK are less relevant to the growth and inflation impacts than the global picture" because the UK is an open trading economy, and reduced foreign demand as well as higher inflation abroad have a direct impact on the British economy.
British officials initially believed they could secure a tariff exemption before Trump's Wednesday announcement. They planned to use concessions regarding the UK digital services tax, which affects large American corporations such as Meta (owner of Facebook), Amazon, and X, as a bargaining chip. However, hopes for concessions diminished when Washington announced that tariffs on steel, aluminum, and cars would also cover the UK.
Prime Minister Starmer announced a "calm, pragmatic approach" to the situation. This stance is supported by British business organizations. The manufacturers' lobby, Make UK, stated that "this is not the time for a trade war," and Shevaun Haviland, Director General of the British Chambers of Commerce, praised the government for "keeping a cool head." "This is a marathon not a sprint, and getting the best deal for the UK is what matters most," Haviland said, adding that "retaliatory tariffs should only be a last resort."
The largest British business lobbying group, the Confederation of British Industry (CBI), also supported the "cool and calm reaction." Rain Newton-Smith, Director General of the CBI, stated in a press release after Trump's press conference that "business has been clear: there are no winners in a trade war. Today’s announcements are deeply troubling for businesses and will have significant ramifications around the world."
