The Government will “wait and see” whether tariffs announced by Donald Trump on Thursday “actually come to pass”, a senior minister has said.
The US president announced what he called “reciprocal tariffs” on all other countries on Thursday evening, claiming it was “fair to all”.
But immediately following his announcement, it was unclear how this would apply to the UK, especially as Mr Trump suggested his policy regarded VAT as a tariff.
Mr Trump said that he views VAT -which is 20 per cent in the UK - as an unfair trade barrier. “We’re going to call it a tariff,” he told reporters.
Such tariffs would knock 0.4 percentage points off UK GDP growth for the next two years, according to Ahmet Kaya, of the National Institute of Economic and Social Research (Niesr), accounting for $30bn (£24bn).
Pat McFadden, Chancellor of the Duchy of Lancaster and one of Sir Keir Starmer’s most senior ministers, told Sky News it was important not to “overreact” to the announcement from the Trump White House.
Asked what the Government’s response to Mr Trump’s announcement was, Mr McFadden said: “Wait and see what it means, it’s the best reaction to everything over the last month.
“Sometimes tariffs are announced, a couple of days later, they are unannounced.”
He added: “The most sensible thing to do with all of these announcements is to digest them, see if they actually come to pass, and then decide what you do.”
Saying there were still “a lot of unanswered questions” about the extent of the tariffs, he went on: “We took the decision…that we wouldn’t breathlessly chase every headline that was coming out over the last month.
“I think that’s the right decision.”
William Bain, of British Chambers of Commerce, said it was “vital that the UK Government does not get sucked into a trade war of tit-for-tat tariffs, which could easily spiral out of control”.
Mr Trump has announced a series of tariffs throughout the first few weeks of his presidency, including earlier this week imposing a 25% levy on steel imports.
But while his approach to international trade has frayed relations with some of the US’s closest allies, particularly Canada, his announcements have not always proved permanent.
(The Government) must make the most of the time available before the introduction of these tariffs to negotiate with the US on alternative arrangements
Having announced tariffs on Canada and Mexico, he later suspended these for 30 days following negotiations.
Canada and Mexico have readied retaliatory tariffs should the duties come into effect, as has the EU, which Mr Trump has repeatedly threatened, while China has already taken retaliatory steps to a 10% tariff on its exports to the US.
But Mr McFadden would not be drawn on whether the UK planned to retaliate, saying it was “premature” to talk about the possibility.
He said: “How mature would it be for me to walk into a studio five minutes after some announcements and say ‘yeah, we’re going to retaliate’?
“That’s not the way you make policy.
“We will always stand up for the national interest, it’s a government’s duty to do that, but the best thing in the national interest is to maintain a good trading relationship with everybody that we need to maintain that with, right across the world.”
Following the announcement, the British Chambers of Commerce (BCC) warned that Mr Trump’s plans would “upend established trade norms” and cause “more cost and uncertainty for investors, businesses and consumers across the world”.
But the BCC’s head of trade policy, William Bain, urged the Government not to “get sucked into a trade war of tit-for-tat tariffs, which could easily spiral out of control”.
He added: “But it must make the most of the time available before the introduction of these tariffs to negotiate with the US on alternative arrangements.
“If they do not, then sectors such as automotives, pharmaceuticals and food and drink could be significantly hit as higher tariffs inevitably feed through into globally higher prices for consumers.”
UK-US trade is worth around £300 billion per year, with Britain importing slightly more from the US than it exports to the country, a fact ministers hope will help secure exemptions from Mr Trump’s tariff regime.
Most of Britain’s exports to the US are in the services sector, and it is unclear whether the reciprocal tariffs include services, although the UK does export more than £8 billion worth of cars and more than £6 billion worth of pharmaceutical products to America.
