UK stays cool: Negotiating trade amidst Trump's tariffs
The UK government does not intend to respond with retaliations and continues its efforts to secure a trade deal with the United States, despite President Donald Trump imposing 10% tariffs on all British goods. London is adopting a strategy of calm negotiations.
The tariffs imposed on the UK are lower than those applied to the European Union (20%), China (34%), or Vietnam (46%). The difference between a 10% and a 20% rate 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 tariffs as "Liberation Day" for his country. He stated that 10% is the minimum foundation for all countries, and the rate for the United Kingdom matches exactly what the American administration's calculations show the British impose on products from the USA. Some countries received "discounted" rates.
For Prime Minister Keir Starmer, whose Labour Party came to power with the promise of stimulating economic growth, the imposed tariffs represent a significant challenge. For weeks, the British government has been working to obtain an exemption from American tariffs. According to estimates by Capital Economics, the 10% tariffs could reduce the UK's GDP by 0.01% to 0.06%, and indirect effects from changes in global trade flows could further lower economic output by 0.01% to 0.13%.
Global consequences of Trump's trade policy
Chancellor Rachel Reeves warned that even if the UK secures a deal excluding British exports from American tariffs, the country will still feel the global consequences of Trump's trade policy. During an 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 United Kingdom is an open trading economy and reduced foreign demand as well as higher inflation abroad directly impact the British economy.
British officials initially believed they could secure an exemption from tariffs before Trump's announcement on Wednesday. They planned to use concessions on the British digital services tax, which affects large American corporations like Meta (owner of Facebook), Amazon, and X, as a bargaining chip. However, hopes for concessions diminished when Washington announced that tariffs on steel, aluminium, and cars would also apply to the UK.
Prime Minister Starmer announced a "calm, pragmatic approach" to the situation. This stance is supported by British business organisations. The manufacturers' lobby, Make UK, stated that this is not a 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 UK's largest business lobbying group, the Confederation of British Industry (CBI), also supported a "cool and calm reaction." Rain Newton-Smith, CBI Director General, 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."
