Britain “must prepare for the worst” from new import tariffs, the foreign secretary David Lammy said yesterday as the world awaits the start of Donald Trump’s trade war.
The United States president has threatened to impose fees of 20 per cent or more on imports from around the world with immediate effect in measures expected to be announced on Wednesday – which he has dubbed “Liberation Day.”
Global market jitters continued over the potential impact of a trade war, as one study estimated it could cost the world £1.1 trillion.
In Britain alone, 25,000 jobs are at risk according to the Institute of Public Policy Research (IPPR) which said the new White House trade policy would “completely destabilise the UK car manufacturing industry.”
Meanwhile, Goldman Sachs analysts expected Britain’s GDP to suffer a greater hit than previously feared even if a UK trade deal were agreed, due to “larger negative spillovers” from tariffs levied against the European Union. As a result, the bank now expects 0.8 per cent of UK growth this year and 1.2 per cent in 2026 – down from 0.9 and 1.3 respectively.
Chancellor Rachel Reeves told a cabinet meeting that there would be a serious impact from the tariffs.
And while business secretary Jonathan Reynolds tried to be optimistic about the prospect of a UK/-US deal, he was unable to give a timeline on when one might be completed. Ministers were also forced to deny the Trump administration was making demands about free speech in the UK as part of any potential trade deal.
Mr Trump has previously announced a 25 per cent import tax will be introduced on all cars imported to the US. He has also announced similar tariffs on steel and aluminium.
However, the announcement on Wednesday is expected to be far more wide ranging.
As the world braces for the impact, Ireland warned it could lose up to 80,000 jobs under a “worst case scenario”.
In the House of Commons, Mr Lammy said “intense conversations” were still taking place on a possible economic agreement.
Liberal Democrat foreign affairs spokesman Calum Miller asked if Britain should enter talks with the EU on a customs union to soften the blow of tariffs.
Mr Lammy replied: “It’s hugely important at this time that we continue the intense conversations we’re having with the US administration on getting an economic agreement but of course we prepare for the worst – all options remain on the table, as the prime minister indicated.”
Earlier, Tory leader Kemi Badenoch had admitted she has not tried to use her relationship with senior White House figures such as vice president J.D. Vance to avoid tariffs.
Researchers at the IPPR warned that employees at Jaguar Land Rover and Mini are some of the most exposed to a potential trade war.
Some 16.9 per cent of UK car exports were to the US last year, representing a total of more than 101,000 units worth £7.6 billion.
IPPR research fellow Pranesh Narayanan said: “Trump’s tariffs have huge potential to completely destabilise the UK car manufacturing industry, affecting tens of thousands of jobs and putting the Government’s growth plans at jeopardy.”
Meanwhile, a new study warns from the Aston Business School in Birmingham estimates a 2025 global trade war could cost $1.4 trillion (£1.1 trillion). The research maps six escalating scenarios, starting with US tariffs on Canada, Mexico and China, through to full global retaliation, with associated wider losses.
Earlier, Sir Keir Starmer told Sky News: “The likelihood is there will be tariffs. Nobody welcomes that.
“We are obviously working with the sectors most impacted at pace on that. Nobody wants to see a trade war but I have to act in the national interests.2
He said he hoped the deal being negotiated with the US would mitigate the tariffs.
Asked if he had been “played” by Mr Trump amid efforts by Sir Keir to build a good relationship, the prime minister said: “The US is our closest ally. Our defence, our security, our intelligence are bound up in a way that no two other countries are.
“So it’s obviously in our national interest to have a close working relationship with the US, which we’ve had for decades, and I want to ensure we have for decades to come.”
He said talks on an economic deal would normally take “months or years” but “in a matter of weeks we have got well advanced in those discussions”.
