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Donald Trump’s swingeing tariffs will harm the UK economy – even if Britain is exempt, Rachel Reeves has warned.
The chancellor said a global trade war triggered by the US President would lead to even higher inflation and slower economic growth.
The UK is seeking a carve out from damaging tariffs which have already seen Canada and China hit with an extra 25 per cent on their goods entering the US.
In retaliation the leader of the Canadian state of Ontario has threatened to cut off Canada’s energy supply from the United States, remove all US alcohol from the shelves and cancel any partnership with Elon Musk’s Starlink.
“They rely on our energy; they need to feel the pain,” Premier Doug Ford said.
China has also hit back and vowed to fight to the “bitter end” in a trade war with the US, announcing up to 15 per cent tariffs on American imports.
Asked about an impending trade war at a conference in central London, Ms Reeves said: “On tariffs, I’ve always been really clear that I believe strongly that free trade is good for exporters and importers, for both countries on the side of a trade deal, and so I don’t want to see tariffs increase. I don’t think it serves anyone well.
“And it’s absolutely the case that even if tariffs aren’t applied to the UK, we will be affected by slowing global trade, by a slower GDP growth and by higher inflation than otherwise would be the case so we don’t want to see tariffs, and I will continue to make the case with all my international counterparts for free and open trade.”
Despite president Trump’s decision to cut military aid to Ukraine, she also said that the US was the UK’s closest partner on defence and that would continue to be the case.
And in what will be interpreted as an appeal to the right, as Nigel Farage’s Reform UK battles Labour in the polls, she also said it was a “stain on our country” that a million young people are not in education or training, with some at home doing “nothing”.
The chancellor also said she wanted to use the recently announced hike in defence spending to support UK businesses but would not “pull up the drawbridge” to foreign manufacturers.
Keir Starmer has pledged to increase defence spending to 2.5 per cent of the economy from April 2027, something the chancellor believes will help create jobs and drive growth in the UK.
Ms Reeves said: “I do want to make sure that as we spend more on defence, that that is used to support British jobs and British industries.
She said she was working with UK defence companies on how to increase capacity and capability to “step up to this moment in the same way the government is stepping up to this moment.”
But she added: “We’ll always have a need to buy things from abroad. I don’t want to pull up the drawbridge, but as we spend more on defence, of course, I want to see that benefit the UK economy and UK jobs.”
She also said “all options” were being considered after former prime minister Rishi Sunak urged the government to help Ukraine by seizing frozen Russian assets.
MPs have called for the UK and its European allies to seize Russian assets worth some 300 billion US dollars, which have been frozen across the continent, to assist Ukraine.
A White House official said the US was “pausing and reviewing” aid to Ukraine to “ensure that it is contributing to a solution”.
It comes just days after a heated clash between US President Donald Trump and Ukraine President Volodymyr Zelensky.
