Reynolds and economists warn of trade impact of US tariffs
The business secretary has warned of a “significant moment for global trade” and predicted a “difficult conversation” with the US lies ahead, as economists predict a £20bn blow to Britain’s economy from Donald Trump’s tariff plans.
Jonathan Reynolds warned the UK should avoid “speculating on how we should respond before there is something to respond to”, stressing it would not be in the national interest to do so.
It comes as analysts warn Donald Trump’s plans to impose tariffs on goods entering the US will deal a multi-billion pound blow to Britain’s economy.
Speaking to the House of Lords international agreements committee on Monday, Reynolds was asked about President-elect Trump’s “colourful statements” on trade, which saw him pledge 60 per cent tariffs on US-sold Chinese products, and 20 per cent on all other imports.
Reynolds said that trade “played a significant role” in the US election and insisted his department was following the debate very closely.
But he cautioned: “We shouldn’t jump into making statements until we have the administration formed and the key people are in positions… I don’t think speculating on how we should respond before there is something to respond to is particularly in the UK’s national interest.”
He stressed a greater challenge for the UK could include the impact of Trump’s policies on our £800bn trade relationship with Europe, vs the £300bn US one, and suggested that the UK should “weigh the consequences” of attempting to pick one side over the other.
While the UK, he said, would be “much more exposed” than the US to a “wider trade confrontation between China and the West, as a much more globally oriented trading nation”.
He added: “Being asked to replicate what another country is proposing might be a much more painful proposition for the UK than it might first appear.
Reynolds insisted he would love to see closer UK-US cooperation on trade, services, new technologies, and the energy transition – but cautioned that there were unresolved issues on US asks on agriculture, including hormone treated beef and chlorine washed chicken.
“We can expect this to be a difficult conversation but we’ve got to wait to see what the offer might be,” he said. “This will be a very significant moment for global trade.”
Trump’s tariff plans pose substantial challenges for the government, according to the Centre for Economics and Business Research (CEBR), and, without retaliation, could reduce UK gross domestic product (GDP) by 0.9 per cent by the end of the US administration.
That is equivalent to about a £20bn blow at the end of his term, based on 2023 figures on the size of the British economy.
Meanwhile, estimates from the National Institute of Economic and Social Research (NIESR) suggest that 10pc tariffs could cut UK economic growth by 0.7 percentage points.
The CEBR said the clearest way to avoid the blow would be to agree a free-trade deal with the US, but it acknowledged issues over food standards were unlikely to make this possible.
Instead, it urged ministers to “bolster [the UK’s] position as a leader in green technology” to counteract Trump’s likely rollback of Joe Biden’s flagship Inflation Reduction Act (IRA).
Economist Sara Pineros said: “The Chancellor faces a pivotal period to act on her pro-growth agenda and position the UK as a competitive destination for investment.
“Ultimately, while US tariffs and rising protectionism pose challenges, other proposals under a new Trump administration also present opportunities for the UK to adapt and thrive.
“Without strengthening its approach, the UK risks taking all the pain associated with a Trump presidency without realising the potential gain.”