Keir Starmer’s government could hit the US with retaliatory tariffs if the UK cannot strike a trade deal with Donald Trump.
Business Secretary Jonathan Reynolds told MPs that ministers will look at “possible retaliatory action” in response to 10 per cent levies on British goods entering the US,as officials work through 417 pages of products they could target.
It comes as the prime minister was unable to rule out another tax raid or more cuts to benefits in a bid to balance the government books. The Office for Budget responsibility (OBR) had already warned Trump tariffs would wipe out all the fiscal headroom established by chancellor Rachel Reeves in her spring statement last week.
And as businesses began to assess the economic turmoil unleashed by the US president the Federation of Small Businesses (FSB) revealed that around a third (32 per cent) of small and medium sized firms have been hit by the tariffs.
The prime minister again appealed for calm but acknowledged at the launch of his local government campaign in Chesterfield that the world is at the beginning of a “new economic era”.
The prime minister said “we have to act and lead differently”, describing the response to President Trump’s tariffs as “not just a short term tactical exercise”.
“It is the beginning of a new era, we need to understand that, just as we have for defence and security, we have to understand the changing world when it comes to trade and the economy,” he added.
Asked by The Independent whether he could rule out further benefit cuts to fill any hole in the public finances left by Mr Trump’s trade war, the prime minister said the Budget was a long way away.
He said: “There’s a lot of water that will have to go under the bridge before then. “Obviously, my job, our job, the government’s job, is to take the steps necessary in our national interest, which is why we’re focusing on progressing the deal that we’ve been discussing with the US, making sure that we are in a position to take other measures, should they be necessary, but at the same time continuing and turbo charging the work we’re doing on growth and reform and changing our economy.
“I’m not going to get into what may or may not happen in six months time.”
Economists and businesses warned of a “seismic change” to world trade.
Emily Fry, senior economist at the Resolution Foundation, said: “The newly announced tariffs represent a seismic change in trade policy, taking US tariffs back to rates not seen since the early 20th century and generating significant volatility in the financial markets.”
Already there had been warnings of 25,000 job losses in the motor industry in the UK due to 25 per cent tariffs but other sectors were also counting the cost. The British Beer and Pub Association pointed out that its £126m trade with the US could be wiped out with a 25 per cent tariff charge.
Emma McClarkin, chief executive of the British Beer and Pub Association said: “A 25 per cent tariff on beer imported into the US is a direct hit to the brewers of the UK, who contribute so much to this country’s economy and heritage.”
Alongside Mr Reynold’s statement in the Commons, the government also published an “indicative list of potential products that the government considers most appropriate for inclusion” in any fight back, a list which spanned more than 400 pages.
The list, which is said to “demonstrate what products may be subject to any future UK tariff response”, includes key US products such as Bourbon whiskey, motorcycles, guitars and jeans but also includes scores of other items ranging from whale meat to chopsticks.
Mr Reynolds, who set a deadline of early May for the consultation, also told the House of Commons any action would be “paused” if a deal was struck.
No 10 denied the month-long exercise meant they were dithering, while Sir Keir brushed off suggestions he should “jump straight into a trade war” with the US, describing this as “a really important moment”.
“That is why we are sensibly doing what is necessary,” Sir Keir said at Labour’s local elections launch in the Midlands.
Earlier, Mr Reynolds insisted “America is a friend” despite the tariffs, due to come into force this weekend.
Hours after the US president ushered in a new era for global trade and accused foreign countries of “ripping off” America, he said he was “disappointed” by the levies, but insisted: “America is a friend, America is our principal ally.
“Our relationship is an incredibly strong economic one, but also a security one and a political one as well.”
Earlier, Australian prime minister Anthony Albanese said Mr Trump’s decision to slap tariffs on his nation, at the same level as the UK, was “not the act of a friend”.
In a sign the UK is still hopeful of a US trade deal to solve the tariff problem, Sir Keir defended the US president’s announcement, saying that Mr Trump was “acting for his country… and that is his mandate”. Acknowledging that “clearly, there will be an economic impact” from the tariffs, the PM said “today, I will act in Britain’s interests with mine”.
Mr Trump has said his “Liberation Day” announcement, which threatens a devastating global trade war, is a “declaration of economic independence”.
European Union nations face 20 per cent penalties while China will pay 34 per cent and Cambodia an eye-watering 49 per cent. Switzerland was also hit hard with 31 per cent. Taiwan, which is struggling for survival against threats from China, faces 32 per cent and India is getting 26 per cent.
Mr Reynolds said the UK must keep “every tool available” as it looks for ways to respond, but said he would “remain engaged while there is the potential for a deal”.
Talks are ongoing and Mr Reynolds has said Britain is the best placed country in the world to negotiate its way out of the dispute with the US.
After days of build up the US president waited for markets to close to make his big announcement in the Rose Garden of the White House as he promised “to make America wealthy again”.
He said: “April 2nd 2025 will forever be remembered as the day American industry was reborn. America’s destiny was reclaimed and the day that we began to make America wealthy again. For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike.”
