Downing Street says it expects the UK to be hit by more tariffs when Donald Trump announces his latest round of trade barriers on Wednesday and said it “reserves the right” to respond to protect the national interest.
Ministers are now expecting the UK to be hit by a tariff that will apply to all countries as part of the US president’s “liberation day”, despite hoping to have secured a carve-out.
With hopes of a deal before 2 April fading, the former top UK trade negotiator Crawford Falconer warned Keir Starmer’s plan for an “economic prosperity deal” with Washington could take as long as a year to come to fruition.
Falconer, who was the government’s most senior trade official until the end of last year, told the Guardian: “You’ve got a year at the most. Trump and the government will say no we can do this quicker, but good luck. But probably less than a year is realistic. If your politicians are looking at real, hard political choices and are focused on it, and really kick officials’ backsides, then yes, you can get these things done in a matter of months as opposed to years.”
No 10 said officials would continue talks with the US “as long as there’s a chance to reach a deal” after forecasters said a 20-percentage-point increase in tariffs on UK goods and services would cut the size of the British economy by 1% and force tax rises this autumn.
Starmer’s official spokesperson said: “We’ve been actively preparing for all eventualities ahead of the expected announcements from President Trump this week, which [we] would expect the UK to be impacted by alongside other countries.
“Our trade teams are continuing to have constructive discussions to agree a UK-US economic prosperity deal, but we will only do a deal which reflects this government’s mandate to deliver economic stability for the British.”
Global fears over Trump’s latest tariff plans were intensifying on Monday, as financial markets sold off sharply, sending share prices sliding in their worst month in more than two years.
Senior members of the government have been engaged in intense negotiations over recent weeks with the US, but are now resigned to being hit with whatever Trump announces on 2 April. However, government sources said they did not recognise the timelines suggested by Falconer.
They acknowledged there was deep uncertainty around what the US president planned to do, including within his own administration, but said they were taking a “cool-headed” approach and were prepared for multiple scenarios.
The spokesperson said: “We’ve been clear that a trade war with [the] US is not in the national interest, but we will reserve the right to respond in a way that does protect British industry once we’ve seen the detail. That’s why we’re preparing for all eventualities. It’s why we’ve said that we rule nothing out.”
Falconer, who led the UK’s attempts to reach a comprehensive US free trade deal during Trump’s first term, said failure to avoid new tariffs on Wednesday would hurt the UK economy but he backed Starmer’s plan to seek a wider deal. “It’ll be damaging to some people if it’s applied, particularly exporters, autos and steel, but it’s not going to shift the UK economy overnight,” he said. “God knows we survived Brexit which is far bigger than this is going to [be].”
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But he said Labour could face mounting pressure to retaliate. “The government need to be careful that mood doesn’t shift, and if Europe moves they might get under some pressure … You do have a bit of explaining to do.”
Trump has already announced 25% levies on cars, steel and aluminium imports, and is expected to impose further tariffs on countries with which the US has a trade imbalance or those he regards as imposing unfair taxes or regulation.
White House officials have singled out VAT as an example of an unfair tax, but Downing Street has rejected the characterisation. Ministers have also been under pressure to drop the 2% digital services tax which hits big US tech giants such as Meta, Google and Amazon.
British businesses want to avoid being dragged into an escalating trade war and many have urged caution from the government. Even if the UK eventually escapes targeted tariffs though, there will still be a knock-on impact of trade barriers on Europe, which is a far bigger trading partner.
