UK in ‘intensive’ talks to fend off US tariffs, Reeves says

[LONDON] The UK is holding urgent talks with the US government in a bid to avoid being hit by extra tariffs planned by President Donald Trump, Chancellor of the Exchequer Rachel Reeves said.

“We are now in intensive discussions with the US administration ahead of the increase in tariffs next week,” she said in an interview with Bloomberg TV on Thursday (Mar 27) “We want to make sure that those trade flows between the UK and US continue to be strong.”

Trump on April 2 is planning to impose so-called reciprocal tariffs on nations that his administration deems to disadvantage American companies with trade barriers beyond import taxes – which could include measures such as the UK’s value added tax, a sales levy. On Wednesday, the US president signed a proclamation to put a 25 per cent tariff on all auto imports. The US is the UK’s biggest export market for cars, worth US$8.3 billion of trade in 2023, and is overall its largest single-country trading partner.

Reeves spoke a day after delivering a spring statement in which she was forced to cut welfare and departmental spending in order to restore a slim margin of £9.9 billion (S$17.1 billion) against her key fiscal rule that day-to-day expenditure should be paid for out of taxation. But the government’s fiscal watchdog, the Office for Budget Responsibility said that headroom would be all-but wiped out in the event of an escalated trade war.

That warning was issued before Trump’s announcement on auto tariffs, which OBR Chair Richard Hughes told BBC Radio on Thursday would cover goods exports worth about 0.2 per cent of UK GDP.

“What Trump has announced overnight is not the whole of that worst-case scenario, but it’s elements of it, and it’s beginning of that risk side,” he said. “It is a tiny fraction of the risks to the outlook.” BLOOMBERG