UK expects to be affected by Trump tariffs, No 10 says

The UK is expecting to be hit by new US tariffs on Wednesday, with Downing Street indicating a deal to exempt British goods will not be reached in time.

US President Donald Trump has said he plans to unveil a raft of new tariffs – or import taxes – on 2 April, on top of a 25% levy on car and car parts which has already been announced.

Over the weekend he suggested the tariffs would hit all countries, not just those with the biggest trade imbalances with the US.

The prime minister’s official spokesman said talks on an economic deal between the two countries to avoid tariffs had been “constructive” but he did not rule out retaliating if they were imposed on the UK.

“When it comes to tariffs, the prime minister has been clear he will always act in the national interest and we’ve been preparing for all eventualities ahead of the announcement from President Trump, which we would expect the UK to be impacted by alongside other countries,” he said.

“We are having constructive discussions on a US-UK economic prosperity deal but we will only do a deal which delivers economic prosperity for the British people and we will only act in the national interest.”

Pressed on whether the government was hopeful of a deal to avert tariffs being reached by Wednesday, the spokesman said discussions between the UK and the US “will likely continue beyond Wednesday”.

He said the UK would “take a calm and pragmatic approach” in response to any tariffs, arguing “a trade war with the US is not in anybody’s interests”.

But he added: “We rule nothing out in response.”

Conservative shadow trade secretary Andrew Griffith MP said: “This news is potentially a hammer blow not just to British businesses and workers but to [the PM’s] own chancellor whose creative accounting at the emergency budget fails to include the impact of tariffs.

“Labour claims talks with the US are going “well”. But, if this is what well looks like, I wouldn’t like to see what the opposite looks like. The prime minister has so far failed to come up with the goods, he needs to rekindle our US trade deal.”

The Liberal Democrats have urged the government to hit back with its own tariffs, as Canada and the European Union have already done.

The party’s leader Sir Ed Davey said: “Just asking nicely clearly doesn’t work with Trump, so we have to stand tall with our allies in Canada and Europe and show that we will not be bullied.

“That means being prepared to impose reciprocal tariffs if necessary, including on Elon Musk’s Teslas, and urgently negotiating a better trade deal with the EU to show Trump we have alternatives.”

It comes after Sir Keir Starmer spoke to Trump over the phone on Sunday, with Downing Street saying the pair had “productive negotiations” about an economic deal.

The government has argued the UK has a relatively equal trading relationship with the US, compared to its other partners.

The independent Office for Budget Responsibility (OBR) has warned a reciprocal trade war would wipe billions off economic growth and all but eliminate the headroom Chancellor Rachel Reeves has to stay within her self-imposed rules on spending and borrowing.

This could lead to further tax rises or spending cuts if she wanted to avoid breaking her fiscal rules.

The OBR’s latest economic forecast, published on Wednesday, said GDP would be 0.6% lower than forecast this year and 1% lower next year in the most “severe” scenario, in which the UK and other nations retaliated to Trump’s tariffs.

In an alternative scenario where the UK does not retaliate, the OBR has forecast a smaller reduction in growth, with GDP 0.4% lower than expected this year and 0.6% lower next year.

It is unclear how the UK would retaliate if tariffs do come into effect. There are a range of options available, from duties on sectors where British products are particularly important to the US, to focusing on specific products like Harley Davidson motorcycles.

UK car exports are worth about £7.6bn per year, and the US is the second largest market for UK cars after the European Union, according to car industry body the Society of Motor Manufacturers and Traders (SMMT).

Trump’s plan is expected a to hit British luxury car makers such as Rolls-Royce and Aston Martin.

The US president argues his measures will help American manufacturers and protect jobs, despite warnings prices could go up for consumers.

During a meeting between the prime minister and president at the White House last month, Trump hinted at “a real trade deal”, which could see the UK avoid the kind of tariffs he has been threatening other countries with.

by Dharshini David, deputy economics editor

The impact of a US tariff on all British goods is very uncertain. It depends on not just on the scale of any tariffs applied on British products, but how the government, businesses and consumers react.

As the car industry knows already, tariffs are extremely worrying for the industries affected – as an exporter you hope that either some of it can be soaked up in the supply chain or your American customers will be happy to pay higher prices – or you take a hit to your own profits by lowering prices.

Or you may lose sales, tariffs are undeniably bad news for exporters in the firing line.

But their impact on prices in the UK is uncertain. If the UK government retaliates with tariffs on American products, households here could face rises. But countries such as China, if disadvantaged by American tariffs, could try to send their goods here instead, pushing down prices.

Broadly, US tariffs would be detrimental to UK growth. Without retaliatory tariffs, the UK’s official forecasters reckon that 0.6% could be knocked off UK growth next year – unhelpful but not disastrous. Underpinning that scenario is a number of assumptions.

But, as it cautions, there are so many uncertainties about not just the policy, but how it would filter through.