The government doesn’t think Donald Trump will impose trade tariffs on the UK, but is “prepared for all scenarios”, a cabinet minister has said.
Darren Jones, the chief secretary to the Treasury, told Sky News’ Sunday Morning with Trevor Phillipsthat the former president’s return to the White House “could be an enormously positive thing with lots of opportunities”.
Mr Trump has threatened to impose tariffs on all imports into the United States, singling out Canada, Mexico, and China as countries that could face steeper measures within hours of his inauguration on Monday.
Asked what the government will do if that happens to the UK, Mr Jones said that was a “hypothetical” question and to wait and see “what actually happens”.
“If that were to happen, I will come back and lay out the details for you. But the point is, is that I don’t think we’re going to be in that scenario,” Mr Jones said.
Image: Darren Jones
He said there is a narrative in the UK that Mr Trump’s presidency poses “a big risk for Britain”, when this isn’t the case.
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“Britain is a brilliant country with huge capabilities and assets which are valued not just to the British people, but to the American economy and other parts of the world,” he said.
“I have no doubt whatsoever that under the Trump administration there are going to be plenty of opportunities that we can seize, and we should be positive about that and be strong about securing this deal.”
Mr Jones confirmed there is ultimately a plan if tariffs are imposed, but said it isn’t for him “to lay out the details in advance of something actually happening on TV”.
“It’s not breaking news that the government prepares for all scenarios,” he added.
“My broader point is that we shouldn’t be looking at president-elect Trump’s inauguration as a risk, or a bad thing for the UK. It could be an enormously positive thing with lots of opportunities.”
President-elect Trumpwill be sworn in to a second term in office on Monday, following his election victory in November, and there have been concerns over what his pledged tariffs could mean for economies around the globe.
The former businessman has been clear he plans to pick up where he left off in 2021 by taxing goods coming into the country, making them more expensive, in a bid to protect US industry and jobs.
Shadow foreign secretary Dame Priti Patel,who is in Washington DC for the inauguration, said Mr Trump is “within his rights to make the statements that he wants around tariffs… but as ever this is a discussion and a negotiation”.
Image: Priti Patel in Washington DC
She said the Labour government should resume her party’s talks over a post-Brexit free trade deal with the US and “not even enter into these discussions around tariffs”.
A trade deal with the US had been set as a priority in the Conservative’s 2019 manifesto but was not achieved by the time of the general election in July last year, which they lost.
Ms Patel went on to call Reform UK leader Nigel Farage a “pop-up act” and “not relevant” when asked if her party should make peace with him to get on well with Mr Trump, given the close relationship of the pair.
She said the Conservatives and Republicans are “sister parties” with “enduring, long-standing ties”.
“We’re not a pop-up act in the way in which they [Reform UK] are… so I don’t think that’s particularly relevant,” she said.
However, the Lib Dems accused the former home secretary of “competing with Reform to be most submissive toward Trump”.
Confidence in Mandelson’s appointment
Mr Trump’s inauguration has also caused a stir after reports in the Sunday papers suggested he could reject Lord Peter Mandelson as Sir Keir Starmer’s nomination for the UK’s ambassador to the US.
The Labour grandee has been critical of Mr Trump in the past, and was last month branded an “absolute moron” by a Trump campaigner.
Image: Lord Mandelson. Pic: PA
However Mr Jones signalled he was confident that the Blair-era minister would take up his position, telling Sky News he “doubts very much” the media reports are true.
“It’s probably being propagated by some politicians that would like to cause a bit of a nuisance. I doubt that will be the case.”
Govt ‘doesn’t agree’ with Khan’s Trump comments
Mr Jones was also forced to distance himself from comments made by Labour’s Mayor of London Sadiq Khan.
Mr Khan has warned of a century-defining battle against “resurgent fascism”, writing in The Observer that “these are deeply worrying times, especially if you’re a member of a minority community”.
Mr Jones said he does not associate with that language and questions about it “are for Sadiq to answer.”
He later told the BBC: “I speak on behalf of the government and we don’t agree with it.”
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.
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.
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.”
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.
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.
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.
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%.
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?
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.