Donald Trump has floated the idea of cutting US trade tariffs against China to 80% – as key peace talks between the sides prepare to get under way.

The weekend meeting, involving top officials from both nations in Switzerland, is seen as an opportunity to ease the most damaging and punitive element of the trade war.

At stake for both sides is not only a deteriorating domestic outlook but a weakening global economy.

Writing on his Truth Social platform, hours after agreeing an interim deal with the UK, the president said: “80% Tariff on China seems right! Up to Scott B [Bessent].”

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It means the decision will lie with Scott Bessent – the US treasury secretary who will lead the US delegation at the talks in Geneva.

The outcome is eagerly awaited after several rounds of tariff hikes that currently total duties of 125% on US imports to China and 145% on Chinese goods arriving in America.

Both levels amount to an effective trade embargo, given the severity of the numbers. A 80% figure against China would remain hugely restrictive.

But the announcement of talks in Switzerland this week has been welcomed broadly – across financial markets too, with the dollar and global stocks rising on Friday in hopeful anticipation of a cooling in the trade hostilities between the world’s two largest economies.

Investors are not only concerned by higher, if not extortionate, prices but also the impact on supply.

The effects are being felt in both economies already.

Fears of a trade war effectively meant that the US economy contracted during the first three months of the year, while the US central bank has held off on interest rate cuts on the grounds that tariffs applied to imports by the Trump administration globally will lift inflation markedly.

Official data out of China is yet to show any obvious pain, but surveys suggest factory orders are tumbling.

The fact that China is suffering was borne out on Wednesday when the country’s central bank cut interest rates and reduced bank reserve requirements to help free up more funding for lending.

The authorities also agreed wider borrowing facilities to help manufacturers.

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It will be hoped that bolstering activity in the economy will help lift prices generally, as China continues to battle deflation.

Officially, China has signalled that it wants the US to make the first concession.

Its delegation in Geneva is led by vice premier He Lifeng – a figure within China who has gained an international reputation as an effective negotiator.

A commerce ministry spokesperson said of the prospects for a breakthrough when confirming the talks: “The Chinese side carefully evaluated the information from the US side and decided to agree to have contact with the US side after fully considering global expectations, Chinese interests and calls from US businesses and consumers.”

White House economic adviser Kevin Hassett told Sky’s US partner CNBC on Friday: “Everything that’s been going on with the meeting in Switzerland is very promising to us.

“We’re seeing extreme respect, treating both sides with respect. We’re seeing collegiality and also sketches of positive developments.”

Sir Keir Starmer was at home in Downing Street, watching Arsenal lose in the Champions League, when he got a call from Donald Trump that he thought presented the chance to snatch victory from the jaws of trading defeat.

The president’s call was a characteristic last-minute flex intended to squeeze a little more out of the prime minister.

It was enough to persuade Sir Keir and his business secretary Jonathan Reynolds, dining with industry bosses across London at Mansion House, that they had to seize the opportunity.

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The result, hurriedly announced via presidential conference call, is not the broad trade deal of Brexiteer dreams, and is certainly not a free-trade agreement.

It’s a narrow agreement that secures immediate relief for a handful of sectors most threatened by Mr Trump’s swingeing tariffs, with a promise of a broader renegotiation of “reciprocal” 10% tariffs to come.

Most pressing was the car industry, which Mr Reynolds said was facing imminent announcements of “very difficult news” at Britain’s biggest brands, including Jaguar Land Rover, which sounds like code for redundancies.

In place of the 25% tariffs imposed last month, a 10% tariff will apply to a quota of 100,000 vehicles a year, less than the 111,000 exported to the US in 2024, but close enough for a deal.

It still leaves the car sector far worse off than it was before “liberation day”, but, with one in four exports crossing the Atlantic, ministers reason it’s better than no deal, and crucially offers more favourable terms than any major US trading partner can claim.

For steel and aluminium zero tariffs were secured, along with what sounds like a commitment to work with the US to prevent Chinese dumping. That is a clear win and fundamental for the ailing industries in Britain, though modest in broad terms, with US exports worth only around £400m a year.

In exchange, the UK has had to open up access to food and agricultural products, starting with beef and ethanol, used for fuel and food production.

In place of tariff quotas on beef that applied on either side (12% in the UK and 20% in America) 13,000 tonnes of beef can flow tariff-free in either direction, around 1.5% of the UK market.

The biggest wins

Crucially, sanitary and phytosanitary (SPS) production standards that apply to food and animal products, and prevent the sale of hormone-treated meat, will remain. Mr Trump even suggested the US was moving towards “no chemical” European standards.

This may be among the biggest wins, as it leaves open the prospect of an easing of SPS checks on trade with the European Union, a valuable reduction in red tape that is the UK’s priority in reset negotiations with Brussels.

Farmers also believe the US offers an opportunity for their high-quality, grass-fed beef, though there is concern that the near-doubling of ethanol quotas is a threat to domestic production.

Technology deals to come?

There were broad commitments to do deals on technology, AI and an “economic security blanket”, and much hope rests on the US’s promise of “preferential terms” when it comes to pharmaceuticals and other sectors.

There was no mention of proposed film tariffs, still unclear even in the Oval Office.

Taken together, officials describe these moves as “banking sectoral wins” while they continue to try and negotiate down the remaining tariffs.

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The challenge from here is that Mr Trump’s “reciprocal” tariff is not reciprocal at all. As commerce secretary Howard Lutnick proudly pointed out in the Oval Office, tariffs on US trade have fallen to less than 2%, while the UK’s have risen to 10%.

As a consequence, UK exporters remain in a materially worse position than they were at the start of April, though better than it was before the president’s call, and for now, several British industries have secured concessions that no other country can claim.

From a protectionist, capricious president, this might well be the best deal on offer.

Quite what incentive Mr Trump will have to renegotiate the blanket tariff, and what the UK has left to give up by way of compromise, remains to be seen. Sir Keir will hope that, unlike the vanquished Arsenal, he can turn it round in the second leg.

Tens of thousands of household energy customers have secured payouts after a compliance review found they had been overcharged.

The industry regulator said that 10 suppliers had handed over compensation and goodwill payments to just over 34,000 customers. The total came to around £7m.

Ofgem said those affected, between January 2019 and September last year, had more than one electricity meter point at their property recording energy usage.

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It explained that while suppliers were allowed to apply multiple standing charges for homes with multiple electricity meters, it meant that some were “erroneously charged more than is allowed under the price cap when combined with unit rates”.

The companies affected were revealed as E.ON Next, Ecotricity, EDF Energy, Octopus Energy, Outfox The Market,
OVO Energy, Rebel Energy [no longer trading], So Energy, Tru Energy and Utility Warehouse.

Of those, Octopus Energy accounted for the majority of the customers hit.

Ofgem said that the near-21,000 customers impacted had received compensation of £2.6m and goodwill payments of almost £550,000.

The redress was revealed at a time when energy bills remain elevated and debts at record levels in the wake of the 2022 price shock caused by Russia’s invasion of Ukraine.

Higher wholesale natural gas prices over the winter months meant that the price cap actually rose in April when a decline would normally be seen.

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The latest forecasts suggest, however, that bills should start to decline for the foreseeable future.

Charlotte Friel, director of retail pricing and systems at Ofgem, said of its compliance operation: “Our duty is to protect energy consumers, and we set the price cap for that very reason so customers don’t pay a higher amount for their energy than they should.

“We expect all suppliers to have robust processes in place so they can bill their customers accurately. While it’s clear that on this occasion errors were made, thankfully, the issues were promptly resolved, and customers are being refunded.”

The watchdog added that all ten suppliers had updated their systems and processes to prevent the error occurring in future.