The chancellor, Rachel Reeves, has set out the case for far-reaching changes to global trade and economic agreements, admitting that Donald Trump’s tariffs will have a “profound” effect on the UK and world economies that require a strong international response.
In her first significant intervention since the US president caused chaos on the global financial markets by announcing huge levies on imports to the US, Reeves says in a column for the Observer that she is “under no illusion about the difficulties that lie ahead”.
While not directly criticising Trump or his policies, Reeves is clear the effects will be economically damaging and says she is determined to act to ease the understandable insecurity about the cost of living felt by British families.
Reeves makes clear that she will argue at a meeting of the International Monetary Fund later this month for a new “more balanced global economic and trading system” that “recognises the benefits of free trade” over the kind of nakedly protectionist strategies employed by Trump in recent weeks.
While Reeves says the UK will continue to push for a good bilateral economic deal with the US, she also says it will be her aim to achieve “an ambitious new relationship with the EU” as well as a trade deal with India.
Rejecting the ideas of protectionism – now being aggressively promoted by Trump as his core economic policy - and backing the free trade alternative, she adds: “The Labour party is an internationalist party. We understand the benefits of free and fair trade and collaboration. Now is not the time to turn our backs on the world.”
Last week, the former prime minister Gordon Brown wrote in the Guardian that leaders of other key trading nations needed to step up their collective response to the chaos unleashed by Trump, warning: “We are seeing a simultaneous breakdown in economic and geopolitical orders.”
Brown said: “We need an economic coalition of the willing: like-minded global leaders who believe that, in an interdependent world, we have to coordinate economic policies across continents if we are to safeguard jobs and living standards.”
Referring to the US under Trump, Brown said the “world is being brought to its knees by one economy, outside which live 96% of the population, who produce 84% of the world’s manufactured goods”.
On Saturday, Trump announced that smartphones and computers would be exempted from the 125% tariffs he has imposed on imports from China, as would electronics components such as memory cards and semiconductors.
Experts had warned the tariffs could cause prices of electronic goods such as iPhones and laptops to dramatically spike for US customers.
Support is growing among economists for a new layer of trade agreements between leading economic powers, under the auspices of the World Trade Organization, but excluding the US for as long as it follows the protectionist route.
With both houses of parliament passing emergency legislation on Saturday to allow the government to take control of British Steel – whose longstanding financial difficulties have been made worse by 25% tariffs imposed by Trump on steel and aluminium sales to the US – Reeves says interventions at home to ensure “Britain’s place as a safe haven to live, invest and do business” will continue.
On Sunday, in a further response to the uncertainties, ministers will announce that British businesses across the country will have access to new support through a multibillion-pound increase in government-backed financing.
The new package will give UK Export Finance the power to expand financing support for British businesses by £20bn, with small businesses also able to access loans of up to £2m through the British Business Bank’s growth guarantee scheme.
Thousands of companies are expected to benefit from the move, including those directly affected by tariffs. The business secretary, Jonathan Reynolds, said: “Within a changing world, we need to adapt, and as part of our plan for change, this government is responding.”
AnOpinium poll for theObserver finds that 34% of adults now believe the US is more of a threat than an ally, up from 16% in November last year, while those who have confidence in the US as an ally are just 35%.
Views of Trump are also becoming more negative. Although the president has said he has an affinity with the UK, the poll shows that more than half of adults believe he is not “a friend of Britain’s” – a 12% leap since January. And fewer people believe he has the best interests of the US at heart than do not. Only 16% of those polled believed he was trustworthy, against 64% who did not.
Since becoming president, Trump has said the UK is “out of line” on trade, imposed a 10% tariff on all UK imports and a further 25% tariff on cars without warning Keir Starmer, and ordered Nato members to spend at least 5% of GDP on defence.
His vice-president, JD Vance, also claimed at a conference in Munich in February that “in Britain and across Europe, free speech is in retreat”, and met leaders of the far-right Alternative für Deutschland party.
Separately, research by a leading thinktank has found that a majority of UK voters want the government to concentrate on rebuilding trade ties with the EU over forging a new economic deal with the US.
Commissioned by the internationalist thinktank Best for Britain, the research found that 53% of voters now believe a closer relationship with the EU will have a positive effect on the UK economy, against just 13% who said the effect would be negative. In turn, 68% believed better relations with the EU would boost UK-EU trade in a clearly positive way.The analysis shows how far the UK public has turned back in favour of the EU since the Brexit referendum nine years ago.
