British firms have been warned to prepare for a “very big hit” from Donald Trump’s tariff wars.
Sir Keir Starmer said talks with the US on a trade deal that would help the UK avoid the US import levies were “well advanced”.
He denied that the Government had tried to “suck up” to Trump to get a trade deal to avoid the tariffs but stressed it would continue negotiating to try to reach an agreement.
This stance, rather than retaliatory tariffs as planned by the European Union, Canada and other countries, was backed by Lord Darroch, a former UK ambassador to Washington during Trump’s first term.
“We have to keep negotiating and there is still, it seems from what the Government is saying, a glimmer of hope that a deal can be done,” he said.
“But meanwhile we have to take the hit on the tariffs that will be announced tomorrow.
“We have 25 per cent threatened on cars...and there may be more.
“So it could be a very big hit.”
Trump has already announced a 25% import tax will be introduced on all cars imported to the US.
Some 16.9% of UK car exports were to the US last year, representing a total of more than 101,000 units worth £7.6 billion.
The levy is on top of a series of tariffs set to come into effect on April 2, which could include a general 20% tax on UK products in response to the rate of VAT, with steel and aluminium also being hit.
Mr Reynolds hopes to secure an exemption for the UK when the US reveals details of worldwide tariffs, but could not give a timescale.
“The framework of an agreement is certainly in place. We could sign heads of terms on that and then talk about the detail over a specific time scale,” he told BBC Breakfast.
“But look, whether the US is willing to come to agreement with countries is a decision for the US.”
He said food standards were a “red line” in trade talks but did not deny that dropping or reducing the digital services tax for US businesses was on the table in negotiations.
Economists are warning that Trump’s tariffs, which he will announce on what he calls “liberation day”, will damage the US economy just as much as it hits other countries.
Stock markets around the world have been hit.
The Office for Budget Responsibility has warned that a full-blown trade war, in which the UK responds in kind to Trump’s tariffs, could knock 1% off gross domestic product, plunging the public finances into deeper crisis.
Such a scenario could lead to tax rises as Chancellor Rachel Reeves has such a small “fiscal headroom” of just £10 billion.
