Good morning. Everyone was very impressed when David nobbled Goliath with a rock to the forehead, but Keir Starmer might be forgiven for scoffing at how easy he had it. At least David got to choose his slingshot. In the global trade war, it is the large philistine in the White House who has picked the weapons – and in the hands of a relative minnow like the UK, the truth is that tariffs will barely make a dent.
With that unpromising alternative on the horizon, Starmer spent yesterday talking about what he can do to help business at home, instead. But the changes he announced to support the car and pharmaceutical industries – even if they are backed up with more action later this week – also look trivial against the size of the task. And as the US president’s latest threat to impose an additional 50% tariff on Chinese imports makes abundantly clear, there is no guarantee that it won’t get bigger still.
For today’s newsletter, I spoke to Richard Partington, the Guardian’s economics correspondent, about the difficult hand facing the prime minister as he seeks to avoid economic meltdown – and how he intends to play it. Here are the headlines.
Five big stories
NHS | Hospitals in England could axe more than 100,000 jobs as a result of the huge reorganisation and brutal cost-cutting ordered by Wes Streeting and the NHS’s new boss. The NHS Confederation, which represents trusts, estimates that an order to cut corporate functions by 50% could mean shedding between 3% and 11% of the workforce.
Gaza | Autopsies conducted on 15 Palestinian paramedics and civil emergency responders who were killed by Israeli forces in Gaza show they were shot in the upper body with “intent to kill”, according to the Palestinian Red Crescent, which is demanding an international investigation into the attack.
Conservatives | One of the Conservatives’ biggest donors has stopped funding the party in a move insiders believe will result in the closure of its northern HQ, the Guardian can reveal. Richard Harpin, the founder of home repairs business HomeServe, has donated £3.8m to the party since 2008 and loaned Rishi Sunak a helicopter during the last election campaign.
Asylum seekers | At least 250 people who were detained at Manston asylum centre when it was dangerously overcrowded are suing the government for unlawful detention and other breaches of their rights. They include a woman who had a miscarriage and a teenager who was a victim of torture and trafficking.
Fertility | Surgeons are hailing an “astonishing” medical breakthrough as a woman became the first in the UK to give birth after a womb transplant. Grace and Angus Davidson named their daughter Amy Isabel after Grace’s sister Amy, who donated her own womb, and Isabel Quiroga, a surgeon who helped perfect the technique.
In depth: ‘They have raised the stakes by saying that they could retaliate’
Keir Starmer’s choice of a Jaguar Land Rover plant in the West Midlands to make his speech yesterday was designed to portray him as ready to intervene on behalf of the UK’s most important industries. “This government will not just sit back and hope,” he said. “That is how politics has failed you in recent years.”
But in truth, the interventions he has set out so far are pretty small compared to the scale of the economic threat – and to many observers, the UK’s industrial policy has been too passive for too long to be able to rise to the challenge of a global economic crisis.
There are no easy options. But here’s what the government is trying.
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What did Starmer announce?
The previous plan for nudging the UK’s car industry towards electric vehicles was designed as a gradual phase-out of petrol and diesel, in order to reach an output of 80% electric by 2030, with hefty fines in place for every fossil fuel car sold above each company’s quota.
That 2030 target remains in place, but there is now more flexibility about interim milestones. The fines for missing the targets will be smaller, and full hybrid and plug-in hybrid vehicles will be allowed for longer.
These changes have had a mixed reception: some in the car industry have suggested that incentives for consumers to move to electric vehicles would be more useful, while climate campaigners see the change as an alarming signal of the government’s priorities.
To support the pharmaceutical industry, Starmer also promised to reduce red tape to allow clinical trials to be set up more quickly, and a £600m investment in health data research. But there is a question about whether any of this is really tailored to deal with the Trump tariffs. “This was likely coming anyway in the government’s industrial strategy this summer,” Richard said. “It’s convenient to frame it as a response to tariffs. The high level view is that the impact in either direction is probably pretty limited.”
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How does that fit into the UK’s industrial strategy?
“At its simplest, industrial strategy is what the government does to steer business towards the areas of the economy that it wants to grow,” Richard said. “It becomes transformative when it’s backed by policy action: changes to taxation, regulation and subsidy in the sectors you care about.”
For a long time, the UK has been accused of not really having an industrial strategy, as this 2023 piece by former economics editor Larry Elliott suggests. Labour has been promising to produce one for a while, but it has already been delayed until June, to coincide with the spending review that will set out plans for the next three years.
That makes sense on one level, Richard said: “You can’t really come up with a fully rounded set of policies unless you’re making spending decisions at the same time. But the government has been indicating for a while that they might bring elements of it forward to give business clarity where they can.”
But the elements being brought forward do not involve major government investment. “The EV mandate doesn’t cost anything to relax,” Richard said. While Starmer has promised more announcements later this week, it isn’t clear that any of it will amount to anything that wouldn’t have been happening in June anyway.
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Can the UK do anything else to mitigate the damage done by tariffs?
There are options available, but none of them are likely to wipe out the damage done by the tariffs, and each comes with significant problems attached. The government could:
• Pivot towards a closer trading relationship with Europe. While all of the attention is on the US at the moment, the EU remains a far more important trading partner for Britain – taking 42% of the UK’s exports against 15% to the US in 2023. “But the government has ruled out a return to the single market or the customs union,” Richard said. And politically, Labour has clearly concluded that being portrayed as ready to reverse Brexit by stealth is too great an electoral risk.
• Focus on a new trade deal with the US. This has been a priority for the government – but with so many countries trying to negotiate new deals at the same time, it’s hard to know how quickly it can realistically be done. There is also the danger that a more liberal policy on US imports would complicate arrangements with the EU. “Chlorinated chicken and hormone-treated beef being allowed into the UK would be a red line for the EU on a new deal with them,” Richard said. “It would make it harder to achieve the reduction in border checks that would be covered by a so-called veterinary agreement. If our standards are in line with the US, that isn’t going to happen.”
• Seek to lure manufacturers to the UK on the basis of the relatively low tariffs. Those seeking a silver lining in Trump’s “liberation day” changes point to the fact that the 10% charge on goods from the UK is much lower than those faced by many competitor economies, and some, like former chancellor Jeremy Hunt and his reputationally challenged predecessor Kwasi Kwarteng, have argued that it’s time to dust off the Brexiters’ “Singapore-on-Thames” dream again. But when companies are deciding where to make things, they need more reliable long-term indications of market conditions than Trump’s temperamental approach to tariffs seems to allow.
• Change the fiscal rules to allow more borrowing. Rachel Reeves resisted this option in her spring statement – but the tariffs look like a decent excuse for thinking again. As Paul Johnson, director of the Institute for Fiscal Studies, told the Observer: “To the extent that this does change the economic situation in ways that could not have been predicted, that does give permission to do things that were not politically doable otherwise.” Yesterday, Starmer defended the fiscal rules, but declined to commit to keeping them until the next election. But he repeated the manifesto promise not to raise VAT, income tax, or national insurance.
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What about retaliatory tariffs?
The government is still insisting that it has a productive relationship with Washington and that a deal can be done – but ministers have also said that the threat of retaliatory tariffs remains on the table.
“They have raised the stakes by saying that they could retaliate on 1 May,” Richard said. But while the UK is a fairly important trading partner for the US, “it still pales in significance compared the EU as a bloc or Mexico, Canada and China.” That means that a response might antagonise Trump without forcing him to the negotiating table.
The most likely area to make an impact in retaliation would be in services rather than goods, Richard added: “We are the US’s largest partner in services in the world.” But as with everything in Trump’s new zero sum economic ecosystem, that benefit would come with a cost. “The problem is that the UK has built an economy that is massively reliant on services. Making it tougher for JP Morgan or Citibank or Google to operate here would have an impact – but it would have serious economic consequences.”
What else we’ve been reading
When the people of Pettorano sul Gizio moved out, the bears moved in. Now, a new generation of people are being drawn to the medieval Italian village because of its ursine residents. Phoebe Weston reports on this wonderful rewriting of neighbourly relations. Sam Coare, newsletters team
The Fence has a remarkable anonymous piece from a clinician working in one of the UK’s asylum hotels. “This space I work in is extremely secretive,” they write. “It is very much like a prison in that nobody has anything, so the only thing you have of value is your word.” Archie
In the future, when Arizona-native Evan Johnston is asked why he is a fan of Southend United football club, he’ll at least have a hilarious story to tell. Sam
Do you want to meet the special-effects dentist who created the Austin Powers mouthful that led to the phrase ‘British teeth’, and read about his top ten sets of gnashers? Obviously you do. Archie
“I don’t really go to parties,” says Billy Corgan. “If I do, I’m usually horrified by what they play.” Unless, it seems, the soundtrack is Katy Perry. This latest entry in the Honest Playlist series is a lovely snapshot into the not-so-serious side of Smashing Pumpkins’ infamously fun-averse frontman. Sam
Sport
Football | Leicester took one step closer to relegation with a 3-0 defeat to Newcastle, with two goals for Jacob Murphy (above left with Alexander Isak) and the other from Harvey Barnes. For Leicester, it is now a record eight home defeats in a row without scoring and 15 losses in their past 16 matches.
Cricket | Harry Brook, 26, has been named as England’s new white-ball captain for both the T20 and ODI teams, despite men’s cricket director Rob Key saying last month he might offer the latter to Ben Stokes. Instead, Stokes will remain focused on leading the Test side and next winter’s Ashes moonshot.
Football | Southampton have sacked Ivan Juric after 107 days in charge, with the club at risk of recording the lowest points tally in Premier League history. Saints were relegated on Sunday after defeat at Tottenham.
The front pages
“Trump threatens extra 50% tariff on China as panic grips markets,” is the splash on the Guardian today, and the same story dominates many UK papers on Tuesday.
“Trump: Don’t be a PANICAN” is the top story on the Daily Telegraph, a reference to a phrase the US president used to describe anxious members of his own Republican party. The Times runs with “No pause in tariffs, vows Trump as stocks sink,” and the Financial Times: “Trump issues new China threat.” “Billions wiped off pensions amid worldwide stock market turmoil,” says the i, while the Metro jokes: “Trump’s ‘medicine’ helps the world’s economy go down.’” Over at the Independent, the lead headline is: “Recession fears as shares tumble on Trump ‘medicine.’”
“Baby born after womb transplant in UK first,” runs the Daily Mail. The Mirror leads with the same story and the headline: “Gift of life”.
Today in Focus
Is it safe to visit the US? – podcast
Adam Gabbatt reports on the visa and green card-holders being held in US detention centres
Cartoon of the day | Ben Jennings
The Upside
A bit of good news to remind you that the world’s not all bad
“You’ve got to be in it to win it”, as the saying goes – something the Milnesium tardigradum has clearly taken to heart. Or at least it would, if it had one. The 0.5mm-long microscopic multisegmented animal has finally reaped its reward for an endurance that’s seen it survive all five planetary extinction events, by taking home the crown of invertebrate of the year 2025. It might resemble a “piglet wrapped in an enormous duvet”, according to the Guardian’s Patrick Barkham, but to us, it just looks like a champion.
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Bored at work?
And finally, the Guardian’s puzzles are here to keep you entertained throughout the day. Until tomorrow.
