Sir Keir Starmer claimed on Wednesday that his patient diplomacy with Donald Trump had been vindicated, after the US president slapped a 10 per cent “reciprocal” tariff on UK exports, half the EU’s 20 per cent rate.
Downing Street said the prime minister’s approach had saved thousands of jobs, but Starmer will now continue to negotiate a UK-US trade deal which he hopes will ultimately cut the US tariff on British exports.
Number 10 was relieved that Trump had spared Britain the most punitive tariffs on his “liberation day”: 10 per cent was the lowest rate imposed by the US president.
But frustration was evident over Trump upending the global trading system and imposing a new tariff on one of its closest allies.
A Downing Street official said: “We don’t want any tariffs at all, but a lower levy than others vindicates our approach. It matters because the difference between 10 per cent and 20 per cent is thousands of jobs.
“We will keep negotiating, keep cool and keep calm. We want to negotiate a sustainable trade deal, and of course to get tariffs lowered. Tomorrow we will continue with that work.”
Starmer has argued for weeks that, since Britain had a broadly balanced trade relationship with the US, it did not deserve to be punished with reciprocal tariffs.
Trade secretary Jonathan Reynolds will update MPs on Thursday and warned that Britain had not ruled out retaliation amid efforts to secure a trade deal.
“We have a range of tools at our disposal and we will not hesitate to act,” he said, while adding: “Nobody wants a trade war and our intention remains to secure a deal.”
Reynolds has been talking to industries that are in the line of fire from Trump’s tariffs — including sectors such as pharmaceuticals, steel and automotive — and most UK business leaders have told him that the focus should be on finding a trade deal to cut the levies.
British officials said Trump’s plan to apply 25 per cent tariffs on all foreign-made cars imported into the US would still apply, as would his 25 per cent levy on steel and aluminium imports.
Stephen Phipson, chief executive of Make UK, the manufacturers’ trade body, said: “The US president’s announcement of 10 per cent tariffs on UK goods exported to the United States and 25 per cent tariffs on British-made autos, steel and aluminium is devastating for UK manufacturing.”
In his search for a trade deal, Starmer has offered to dilute or scrap Britain’s digital services tax, which particularly hits US technology giants, and has also put on the table UK tariff cuts on US exports in areas such as some meat products and seafood.
Lord Peter Mandelson, Britain’s US ambassador, is also pursuing a parallel track aimed at securing a tech agreement with Washington that would involve closer co-operation in areas such as artificial intelligence and space.
The fact that Trump has handed Britain a more favourable tariff rate than the one he imposed on the EU could create tensions with Brussels at a time when Starmer is trying to “reset” post-Brexit relations.
Starmer also faces a political danger if he is perceived to be refusing to stand up to Trump, when allies such as the EU and Canada are fighting back with retaliatory tariffs.
Liberal Democrat leader Sir Ed Davey called on Starmer on Wednesday to work with the EU, Canada and other partners in forming an “economic coalition of the willing” to take on the US president.
Chancellor Rachel Reeves has been warned by the independent Office for Budget Responsibility that her £9.9bn of fiscal headroom would be virtually wiped out if Trump’s tariffs announcement sparked a full-scale global trade war and unleashed a significant hit to the British economy.
Reeves admitted to MPs that, even if securing Britain a special deal on US tariffs were to be agreed, “that doesn’t mean somehow we are out of the woods and not impacted by tariffs”.
But she added: “We don’t want to be posturing here. The prize on offer is a good economic agreement between us and the US.”
Shadow business secretary Andrew Griffith said: “The silver lining is that Brexit — which Labour ministers voted against 48 times — means that we face far lower tariffs than the EU.”
The prospect of the EU imposing retaliatory tariffs on the US but the UK refusing to do so also throws up another problem for Starmer: the fallout for Northern Ireland and its sensitive post-Brexit settlement.
The region, which has remained in the EU’s single market for goods under a post-Brexit trading deal, is also part of the UK customs territory and is subject to a complex web of trading rules.
