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Downing Street has warned that “nothing is off the table” if the US reneges on a 10 per cent tariff deal struck with the UK last year and hits Britain with Donald Trump’s new 15 per cent global tariff.
Although Downing Street said it wanted to resolve the issue with “constructive discussion”, a spokesperson said that reciprocal action was an option if the issue was not resolved amicably.
“Nothing is off the table at this stage,” said a spokesperson for the prime minister Sir Keir Starmer, but added: “Industry doesn’t want to see a trade war.”
Number 10 said Peter Kyle, business secretary, spoke to Jamieson Greer, US trade representative, over the weekend to urge him to honour the US-UK deal and to express “concerns about new uncertainty” for businesses.
Greer told CBS at the weekend that the US would stand behind trade deals struck with countries such as Britain in spite of the proposed new global tariff. “We expect to stand by them,” he said.
The biggest potential loser from the proposed US global flat rate of 15 per cent would be the UK, which had secured a 10 per cent tariff on many goods but will now see a 2.1 percentage point increase in its average tariff rate, according to the trade monitoring body Global Trade Alert.
Kyle and Varun Chandra, Starmer’s US trade envoy, have made the case in a series of conversations that last May’s trade deal brought benefits to US farmers and ranchers as well as for US ethanol producers.
The proposed new US tariff regime has raised concerns among business leaders and undermined Starmer’s assertion that his good personal relationship with Trump is delivering results for Britain.
However, British officials noted that the proposed 15 per cent tariff would not affect separate sectoral trade agreements with London – conducted under a different US legal framework.
For example, Downing Street highlighted that Britain had negotiated a 10 per cent tariff on cars, 25 per cent on steel and aluminium and zero per cent on pharmaceuticals. “We don’t expect this to affect sectoral tariffs,” Starmer’s spokesperson said.
British officials also said that the UK should continue to benefit when the US concludes sectoral “Section 301” investigations into different sectors, which have raised fears of new tariffs on semiconductors and other aspects of digital trade.
“We expect the UK to be excluded from many or most of these, including pharmaceuticals, on account of our deal,” said one official, adding that these accounted for a large part of UK trade with the US.
“On the wider tariff, we are working hard to stay at 10 per cent although there is legal complexity. That’s what Peter Kyle and Varun Chandra have been talking about and hope to achieve.”
Trump had originally used the International Emergency Economic Powers Act to impose tariffs on US trade partners, but a majority ruling of the Supreme Court struck those down last week.
Andy Haldane, president of the British Chambers of Commerce, told the BBC on Monday: “The perversity of what happened at the weekend was that those who got good deals, the allies, have been most disadvantaged.”
Global Trade Alert found that Brazil will enjoy the biggest reduction in average tariff rates — falling by 13.6 percentage points — followed by China, with a 7.1 percentage point reduction.