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Jacob Rees-Mogg, the business secretary, has opened formal talks with Britain’s second-biggest steel producer about a taxpayer bailout amid fears for thousands of industrial jobs.

Sky News has learnt that Mr Rees-Mogg wrote to Jingye Group, the owner of British Steel, last week, to express a willingness to negotiate over the Chinese company’s request.

A source close to the discussions said British Steel had agreed to maintain its current operations and workforce while talks with ministers were ongoing.

Earlier this month, Sky News revealed that Jingye, which bought British Steel out of insolvency in 2020, had told the government that its two blast furnaces at its Scunthorpe steelworks were unlikely to be viable without government aid.

Subsequent reports indicated that the level of support required by Jingye was likely to be in the order of £500m.

Tata Steel, meanwhile, which is the biggest player in the UK steel sector, has also requested financial help from the government.

A Whitehall insider said on Monday that talks were “underway with the steel sector, including British Steel and Tata, to secure the sector’s long-term future”.

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British Steel employs about 4,000 people, with thousands more jobs in its supply chain dependent upon the company.

‘We recognise businesses feeling energy price impact’

The Department for Business, Energy and Industrial Strategy (BEIS) declined to comment on the content of Mr Rees-Mogg’s letter, although a spokesman said: “We are working across the steel sector on achieving their sustainable and competitive long-term future.

“We recognise that businesses are feeling the impact of high global energy prices, particularly steel producers, which is why we announced the Energy Bill Relief Scheme to bring down costs.

“This is in addition to extensive support we have provided to the steel sector as a whole to help with energy costs, worth more than £780m since 2013.”

Jingye is said to be prepared to make thousands of people redundant if ministers reject its request for financial support.

It would then plan to import steel from China to roll at British Steel’s UK sites, according to the insider.

Industrial consumers of energy have complained for months that soaring prices are imperilling their ability to continue operating.

SCUNTHORPE, ENGLAND - OCTOBER 19:  A view of the Tata Steel processing plant at Scunthorpe which may make 1200 workers redundant on October 19, 2015 in Scunthorpe, England. Up to one in three workers at the Lincolnshire steel mill could lose their jobs alongside workers at other plants in Scotland. Tata Steel UK  is due to announce the Scunthorpe job losses this week.  (Photo by Christopher Furlong/Getty Images)
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The Scunthorpe plant was previously owned by Tata

Politically unpalatable menu of options for Rees-Mogg

For Mr Rees-Mogg, who took over as business secretary just weeks ago, the question of government support for a Chinese-owned company presents a politically unpalatable menu of options.

If no state funding is made available and significant numbers of jobs are axed, it would undermine a key tenet of the ‘levelling-up’ strategy that became a doctrine of Boris Johnson’s administration.

An agreement to provide substantial taxpayer funding to a Chinese-owned business, however, would almost certainly provoke outrage among Tory critics of Beijing.

China’s role in global steel production, after years of international trade rows about dumping, would make any subsidies even more contentious.

A British Steel spokesman said two weeks ago: “We are investing hundreds of millions of pounds in our long-term future but like most other companies we are facing a significant challenge because of the economic slowdown, surging inflation and exceptionally high energy and carbon prices.

“We welcome the recent announcement by the UK government to reduce energy costs for businesses and remain in dialogue with officials to ensure we compete on a level playing field with our global competitors.”

How British Steel ended up needing support

In May 2019, the Official Receiver was appointed to take control of the company after negotiations over an emergency £30m government loan fell apart.

British Steel had been formed in 2016 when India’s Tata Steel sold the business for £1 to Greybull Capital, an investment firm.

As part of the deal that secured ownership of British Steel for Jingye, the Chinese group said it would invest £1.2bn in modernising the business during the following decade.

Jingye’s purchase of the company, which completed in the spring of 2020, was hailed by Mr Johnson as assuring the long-term future of steel production in Britain’s industrial heartlands.

“The sounds of these steelworks have long echoed throughout Yorkshire and Humber and the North East,” he said.

“Today, as British Steel takes its next steps under Jingye’s leadership, we can be sure these will ring out for decades to come.”

Liberty Steel, the third-biggest player in the industry, saw a bid for £170m in state aid rejected last year by Kwasi Kwarteng, the then business secretary and the now former chancellor.

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Trump trade war escalation sparks global market sell-off

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Trump trade war escalation sparks global market sell-off

Donald Trump’s trade war escalation has sparked a global sell-off, with US stock markets seeing the biggest declines in a hit to values estimated above $2trn.

Tech and retail shares were among those worst hit when Wall Street opened for business, following on from a flight from risk across both Asia and Europe earlier in the day.

Analysis by the investment platform AJ Bell put the value of the peak losses among major indices at $2.2trn (£1.7trn).

The tech-focused Nasdaq Composite was down 5.8%, the S&P 500 by 4.3% and the Dow Jones Industrial Average by just under 4% at the height of the declines. It left all three on course for their worst one-day losses since at least September 2022 though the sell-off later eased back slightly.

Trump latest: UK considers tariff retaliation

Analysts said the focus in the US was largely on the impact that the expanded tariff regime will have on the domestic economy but also effects on global sales given widespread anger abroad among the more than 180 nations and territories hit by reciprocal tariffs on Mr Trump‘s self-styled “liberation day”.

They are set to take effect next week, with tariffs on all car, steel and aluminium imports already in effect.

Price rises are a certainty in the world’s largest economy as the president’s additional tariffs kick in, with those charges expected to be passed on down supply chains to the end user.

The White House believes its tariffs regime will force employers to build factories and hire workers in the US to escape the charges.

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The latest numbers on tariffs

Economists warn the additional costs will add upward pressure to US inflation and potentially choke demand and hiring, ricking a slide towards recession.

Apple was among the biggest losers in cash terms in Thursday’s trading as its shares fell by almost 9%, leaving it on track for its worst daily performance since the start of the COVID pandemic.

Concerns among shareholders were said to include the prospects for US price hikes when its products are shipped to the US from Asia.

Other losers included Tesla, down by almost 6% and Nvidia down by more than 6%.

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PM: It’s ‘a new era’ for trade and economy

Many retail stocks including those for Target and Footlocker lost more than 10% of their respective market values.

The European Union is expected to retaliate in a bid to put pressure on the US to back down.

The prospect of a tit-for-tat trade war saw the CAC 40 in France and German DAX fall by more than 3.4% and 3% respectively.

The FTSE 100, which is internationally focused, was 1.6% lower by the close – a three-month low.

Financial stocks were worst hit with Asia-focused Standard Chartered bank enduring the worst fall in percentage terms of 13%, followed closely by its larger rival HSBC.

Among the stocks seeing big declines were those for big energy as oil Brent crude costs fell back by 6% to $70 due to expectations a trade war will hurt demand.

The more domestically relevant FTSE 250 was 2.2% lower.

A weakening dollar saw the pound briefly hit a six-month high against the US currency at $1.32.

There was a rush for safe haven gold earlier in the day as a new record high was struck though it was later trading down.

Sean Sun, portfolio manager at Thornburg Investment Management, said of the state of play: “Markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade.”

He warned there was a big risk of escalation ahead through countermeasures against the US.

Read more:
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Sandra Ebner, senior economist at Union Investment, said: “We assume that the tariffs will not remain in place in the
announced range, but will instead be a starting point for further negotiations.

“Trump has set a maximum demand from which the level of tariffs should decrease”.

She added: “Since the measures would not affect all regions and sectors equally, there will be winners and losers as in 2018 – although the losers are more likely to be in the EU than in North America.

“To protect companies in Europe from the effects of tariffs, the EU should not respond with high counter-tariffs. In any case, their impact in the US is not likely to be significant. It would be more efficient to provide targeted support to EU companies in the form of investment and stimulus.”

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British businesses issue warning over ‘deeply troubling’ Trump tariffs

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British businesses issue warning over 'deeply troubling' Trump tariffs

British companies and business groups have expressed alarm over President Donald Trump’s 10% tariff on UK goods entering the US – but cautioned against retaliatory measures.

It comes as Business Secretary Jonathan Reynolds launched a consultation with firms on taxes the UK could implement in response to the new levies.

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A 400-page list of 8,000 US goods that could be targeted by UK tariffs has been published, including items like whiskey and jeans.

On so-called “Liberation Day”, Mr Trump announced UK goods entering the US will be subject to a 10% tax while cars will be slapped with a 25% levy.

The government’s handling of tariff negotiations with the US to date has been praised by representative and industry bodies as being “cool” and “calm” – and they urged ministers to continue that approach by not retaliating.

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The latest numbers on tariffs

Business lobby group the CBI (Confederation of British Industry) said: “Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices”.

Industry body the British Retail Consortium (BRC) also cautioned: “Retaliatory tariffs should only be a last resort”.

‘Deeply troubling’

While a major category of exports, in the form of services – like finance and information technology (IT) – has been exempted from the tariffs, the impact on UK business is expected to be significant.

Mr Trump’s announcement was described as “deeply troubling for businesses” by the CBI’s chief executive Rain Newton-Smith.

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The Federation of Small Businesses (FSB) also said the tariffs were “a major blow” to small and medium companies (SMEs), as 59% of small UK exporters sell to the US. It called for emergency government aid to help those affected.

“Tariffs will cause untold damage to small businesses trying to trade their way into profit while the domestic economy remains flat,” the FSB’s policy chair Tina McKenzie said. “The fallout will stifle growth” and “hurt opportunities”, she added.

Companies will need to adapt and overcome, the British Export Association said, but added: “Unfortunately adaptation will come at a cost that not all businesses will be able to bear.”

Watch dealer and component seller Darren Townend told Sky News the 10% hit would be “painful” as “people will buy less”.

“I am a fan of Trump, but this is nuts,” he said. “I expect some bad months ahead.”

Industry body Make UK said the 25% tariffs on cars, steel and aluminium would in particular be devastating for UK manufacturing.

Cars hard hit

Carmakers are among the biggest losers from the world trade order reshuffle.

Auto industry body the Society of Motor Manufacturers and Traders (SMMT) said the taxes were “deeply disappointing and potentially damaging measure”.

“These tariff costs cannot be absorbed by manufacturers”, SMMT chief executive Mike Hawes said. “UK producers may have to review output in the face of constrained demand”.

The new taxes on cars took effect on Thursday morning, while the measures impacting car parts are due to come in on 3 May.

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Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

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Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Economists immediately started scratching their heads when Donald Trump raised his tariffs placard in the Rose Garden on Wednesday. 

On that list he detailed the rate the US believes it is being charged by each country, along with its response: A reciprocal tariff at half that rate.

So, take China for example. Donald Trump said his team had run the numbers and the world’s second-largest economy was implementing an effective tariff of 67% on US imports. The US is responding with 34%.

Trump latest: UK considers tariff retaliation

How did he come up with that 67%? This is where things get a bit murky. The US claims it studied its trading relationship with individual countries, examining non-tariff barriers as well as tariff barriers. That includes, for example, regulations that make it difficult for US exporters.

However, the actual methodology appears to be far cruder. Instead of responding to individual countries’ trade barriers, Trump is attacking those enjoying large trade surpluses with the US.

A formula released by the US trade representative laid this bare. It took the US’s trade deficit in goods with each country and divided that by imports from that country. That figure was then divided by two.

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So, in the case of China, which has a trade surplus of $295bn on total US exports of $438bn, that gives a ratio of 68%. The US divided that by two, giving a reciprocal tariff of 34%.

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PM will ‘fight’ for deal with US

This is a blunt measure which targets big importers to the US, irrespective of the trade barriers they have erected. This is all part of Donald Trump’s efforts to shrink the country’s deficit – although it’s US consumers who will end up paying the price.

But what about the small number of countries where the US has a trade surplus? Shouldn’t they actually be benefiting from all of this?

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That includes the UK, with whom the US has a surplus (by its own calculations) of $12bn. By its own reciprocal tariff formula, the UK should be benefitting from a “negative tariff” of 9%.

Instead, it has been hit by a 10% baseline tariff. Number 10 may be breathing a sigh of relief – the US could, after all, have gone after us for our 20% VAT rate on imports, which it takes issue with – but, by Trump’s own measure, we haven’t got off as lightly as we should have.

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