April 4
The UK government is weighing up its response to US tariffs of 10% on all its imports, set to come into force tomorrow (5 April).
Business and trade secretary Jonathan Reynolds announced that the government is consulting with UK firms on potential impact of the tariffs, and warned that if UK negotiators are unable to agree a deal by 1 May, the UK could impose retaliatory tariffs.
UK firms can submit their feedback on the tariffs here. They can also share their views on the impact of US tariffs or any future UK retaliatory tariffs with the Chartered Institute, who will be submitting its own response, via publicaffairs@export.org.uk.
Officials are currently working through 417 pages of US products it could apply measures to.
Negotiations have been ongoing since UK prime minister Sir Keir Starmer’s Washington DC visit earlier this year, with treasury ministers saying that they are still “negotiating intensively to secure a deal” that could eliminate tariffs.
US president Donald Trump claimed that Starmer was “very happy” with the 10% rate, while the PM himself described the wider tariff announcement as “the beginning of a new economic 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”.
Market reacts
The new economic era began with a series of precipitous drops across markets globally, as stocks fell at rates economists compared to the early days of the 2020 Covid pandemic.
Wall Streel was left reeling from a US$2.5trn drop in response to Trump’s tariff announcements, as the S&P 500 – the index tracking the nation’s biggest firms – fell 4.8%. The more tech-oriented Nasdaq composite fell 6%.
The UK's FTSE 100 index fell 1.5% yesterday and a further 0.68% today.
Reverberations were felts elsewhere. Japan’s Topix closed 3.4% lower today, while the Stoxx Europe 600 fell 1% in early trading today (4 April).
Vietnam, which was handed a 46% reciprocal tariff, saw its Ho Chi Minh index drop 3.7%.
Trump has insisted the US economy “will boom” since making the tariff announcement Wednesday (2 April). However, leading economic figures have warned the measures will harm the global economy.
International Monetary Fund managing director, Kristalina Georgieva, warned that the announcement poses “a significant risk to the global outlook”,
WTO response
The World Trade Organization’s (WTO) director general, Dr Ngozi Okonjo-Iweala, also released a statement yesterday, in which she said tariffs would have a “substantial implications for global trade and economic growth prospects”.
Dr Ngozi cited WTO estimates that showed the tariffs could lead to an overall contraction of 1% in global trade volumes this year, 4 percentage points lower than initially projected at the start of the year.
She added that she’s “deeply concerned” about these figures and “the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade”.
The former Nigerian finance minister called on member states to “manage the resulting pressures responsibly to prevent trade tensions from proliferating” and said many had already contacted the WTO with questions about the potential impact of tariffs on “their economies and the global trading system”.
EU faces barrage of Asian goods
Aside from the threat of retaliatory tariffs, a further spike in protectionism could emanate from Europe, as the EU faces a wave of Chinese goods diverted from the US.
The FT reports that senior European diplomats and banking figures are anticipating an increase in imports of Chinese electrical goods, after Trump slapped a reciprocal tariff of 34% on Chinese imports, which will be added to an existing 20% levy from Wednesday (9 April).
The Chinese finance ministry said it would impose a 34% tariff on US imports from 10 April.
One diplomat told the publication that the EU would likely need to take “safeguard measures” but were “very concerned” this would sour relations with China.
The EU has already slapped the equivalent of a 35% tariff on a number of China’s electric vehicle manufacturers for benefiting from market-distorting government subsidies, as well as launching probes into the Chinese wind turbine and solar panel industry last year for the same reason.
TikTok divestment
Reports suggest that Trump could be prepared to walk back from China’s tariff rate in exchange for Chinese TikTok owner ByteDance selling the company.
“We have a situation with TikTok where China will probably say ‘we’ll approve a deal, but will you do something on the tariffs’. The tariffs give us great power to negotiate,” the president said aboard Air Force One.
Last year the US passed legislation banning the video-sharing app and e-commerce site, which was approved in January. In order to continue existing in the US, the legislation required that ByteDance divest from the app.
Trump extended the initial deadline for this until 5 April.
April 2
Prime minister Sir Keir Starmer could offer US tech firms a major tax cut in return for tariff relief, according to reports.
The Guardian reports today that the UK government is mulling a cut to the top 2% rate of the Digital Services Tax (DST) on tech firm revenue, while expanding the base of smaller companies required to pay the tax to make up the shortfall. This would have the effect of lowering the amount paid by some of the US’ largest tech companies, including Alphabet, Meta and Apple.
The tariffs planned for today’s ‘Liberation Day’ announcements at 4pm Eastern Time (9pm British Summer Time) include a 25% rate on all car imports to the US, which a report from the Institute for Public Policy Research (IPPR) has suggested could put 25,000 UK jobs at risk.
EU plans
Europe, meanwhile, is planning its own approach to the imminent announcements. Ursula von der Leyen, president of the European Commission, has said the EU has a “strong plan” which includes consultation with member states on an €18bn package of retaliatory tariffs covering steel and aluminium as well as a range of food products.
Von der Leyen said yesterday that “Europe has not started this confrontation”.
“We do not necessarily want to retaliate, but if it is necessary we have a strong plan to retaliate and we will use it.”
1 April
UK business and trade secretary Jonathan Reynolds has said that the UK is well-placed to have US tariffs on its goods reversed following their likely announcement tomorrow (2 April).
Speaking to the BBC, Reynolds said that, while he expects the UK to be hit by tariff plans this week alongside the rest of the world’s nations, it is in the "best possible position of any country" to convince the US to offer an exemption in the near term.
"Some of that comes down to the US and whether they want to do that.
“I do believe not only can we get to a place where we are avoiding tariffs on each other, but we're also strengthening that relationship."
‘Pursuing our national interest’
The FT reports meanwhile that Reynolds has called it a “a very serious and significant moment” for the country, and has promised to implement new anti-dumping measures to prevent goods diverted from the US by tariffs from flooding the UK market.
Reynolds has also said “it might not be possible for any country in the world to be exempt from the initial announcements,” and that “it’s not about sucking up to anyone or not responding — it’s about pursuing our national interest”.
He also denied reports that tariffs on the UK could be a US expression of concerns about free speech in the UK. The US State Department said over the weekend that it was “concerned about freedom of expression in the UK”, while a source told the Telegraph that there would be “no free trade without free speech”. Reynolds said that this had only been expressed by the State Department, rather than by US trade negotiators.
Starmer remarks
It comes after a spokesman for prime minister Sir Keir Starmer said yesterday that there had been “constructive” talks between the UK government and the US administration. He added:
"When it comes to tariffs, the prime minister has been clear he will always act in the national interest and we've been preparing for all eventualities ahead of the announcement from President Trump, which we would expect the UK to be impacted by alongside other countries.”
While he added that the government would “rule nothing out in response”, he insisted that it would maintain a “calm and pragmatic approach” as talks continue past Wednesday’s ‘Liberation Day’ tariff announcements.
The government also insisted it would pursue a “US-UK economic prosperity deal” as long as it remained in “the national interest”.
Europe responds
A majority of Europeans surveyed by YouGov this week have said they support retaliation against US tariffs.
Germans, who said they expected their economy to be hit hardest by tariffs owing to the size of their country’s car manufacturing industry, were 68% in favour – though this number was even higher among Danes, who were 79% in favour.
Between 60 and 76% said they expected the wider EU economy to face a significant impact from Trump’s policy.
Stock markets in Europe, the US and the Asia-Pacific region all fell yesterday after Trump dispelled hopes for a programme of tariffs that would be limited only to those countries with the largest trade imbalances with the US.
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