UK shares fell today after Keir Starmer and Donald Trump held trade talks amid a frantic last-ditch bid to dodge US tariffs.
Mr Trump has vowed to hit foes and allies alike with levies on so-called ‘Liberation Day’, April 2.
The president complains that taxes such as VAT are unfair on American firms – even though it is charged on all sales, not just imports.
Sir Keir has been trying to negotiate an exemption for the UK with a wider deal, arguing that trade between the two countries is already balanced.
However, he has already failed to head off tariffs on steel and ministers seem increasingly resigned to Britain being included, at least initially.
Downing Street is said to be considering retaliating with extra duties on US goods such as Jack Daniel’s whiskey, Harley Davidson motorbikes and Levi’s jeans.
The prospect of a trade war has been causing near-panic on global stock markets, with Asia down sharply overnight – and the FTSE 100 dropping 0.75 per cent on opening this morning.
Keir Starmer and Donald Trump have held trade talks amid a frantic bid to dodge US tariffs
Sir Keir has said the UK ‘reserves the right’ to introduce reciprocal tariffs on the US if a deal to exempt the UK cannot be reached
The prospect of a trade war has been causing near-panic on global stock markets, with Asia down sharply overnight – and the FTSE 100 dropping 0.75 per cent on opening this morning
Downing Street is said to be considering retaliating with extra duties on US goods such as Jack Daniel’s whiskey, Harley Davidson motorbikes and Levi’s jeans
A No10 spokesman said of the call between Sir Keir and Mr Trump last night: ‘They discussed the productive negotiations between their respective teams on a UK-US economic prosperity deal, agreeing that these will continue at pace this week.’
The US president has announced a 25 per cent import tax will be introduced on all cars imported to the US, a measure expected to hit British luxury car makers such as Rolls-Royce and Aston Martin.
The levy is on top of a series of tariffs set to come into effect on April 2, which could include a general 20 per cent tax on UK products in response to the rate of VAT.
The UK currently imposes 20 per cent VAT on most goods and services.
The National Institute of Economic and Social Research (NIESR) previously estimated that tariffs of that scale could knock 0.4 percentage points off UK economic growth for the next two years – equivalent to around £24billion.
That could make or break for the Government’s plans to grow the economy, after Rachel Reeves desperately tried to balance the books with spending cuts in the Spring Statement last week.
The Treasury’s OBR watchdog warned her £9.9billion headroom – historically small – could easily be destroyed by Mr Trump’s trade war.
Mr Trump has vowed to hit foes and allies alike with levies on so-called ‘Liberation Day’, April 2
Sir Keir has said the UK ‘reserves the right’ to introduce reciprocal tariffs on the US if a deal to exempt the UK cannot be reached.
However, the OBR estimated that the impact of imposing reciprocal tariffs on the US would be worse for the UK than allowing the levy to go ahead unimpeded.
Abolishing or reducing the digital services tax on big tech firms, including social media companies, search engines and online marketplaces, is reportedly being considered as part of the negotiations.
Downing Street said Mr Trump passed on his best wishes to the King, who recently had to cancel engagements due to side effects from his cancer treatment.
