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.”

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.

The Bank of England has cut interest rates from 4.5% to 4.25%, citing Donald Trump’s trade war as one of the key reasons for the reduction in borrowing costs.

In a decision taken shortly before the official confirmation of a trade deal between Britain and the United States, the Bank’s monetary policy committee (MPC) voted to reduce borrowing costs in the UK, saying the economy would be slightly weaker and inflation lower in part as a result of higher tariffs.

However, it stopped short of predicting that the trade war would trigger a recession.

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Further rate cuts are expected in the coming months, though there remains some uncertainty about how fast and how far the MPC will cut – since it was split three ways on this latest vote.

Two members of the nine-person MPC voted to reduce rates by even more today, taking them down to 4%. But another two on the committee voted not to cut them at all, leaving them instead at 4.5%.

In the event, five members voted for the quarter point cut – enough to tip the balance – with the accompanying minutes saying that while “the current impact of the global trade news should not be overstated, the news was sufficient for those members to judge that a reduction in Bank Rare was warranted.”

Even so, the Bank’s analysis suggests that while higher tariffs were likely to depress global and UK economic growth, and help push down inflation, the impact would be relatively minor, with growth only 0.3% lower and inflation only 0.2% lower.

Governor, Andrew Bailey, said: “Inflationary pressures have continued to ease, so we’ve been able to cut rates again today.

“The past few weeks have shown how unpredictable the global economy can be. That’s why we need to stick to a gradual and careful approach to further rate cuts. Ensuring low and stable inflation is our top priority.”

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The Bank raised its forecast for UK economic growth this year from 0.75% to 1%, but said that was primarily because of unexpectedly strong output in the first quarter.

In fact, underlying economic growth remains weak at just 0.1% a quarter.

It said that while inflation was expected to rise further in the coming months, peaking at 3.5% in the third quarter, it would drop down thereafter, settling at just below 2% towards the end of next year.