UK facing threat of Trump tariffs braces itself for ‘all scenarios’

LONDON – Prime Minister Keir Starmer is preparing for all eventualities as the US presidency changes hands on Jan 20, with the incoming administration of Donald Trump threatening to slap tariffs on trade with the rest of the world.

Trump has repeatedly

vowed to impose tariffs of as much as 20 per cent on imports to the US,

with even higher rates levied on Chinese goods – a potential move that UK Business and Trade Secretary Jonathan Reynolds said last week concerns him because “the exposure, the danger to the UK is actually greater than even some comparable countries”. 

But on Jan 19, a Cabinet colleague was more sanguine. 

“The government has prepared for all scenarios,” chief secretary to the Treasury Darren Jones – Chancellor of the Exchequer Rachel Reeves’ deputy – told BBC TV in an interview. “We need to see what the Trump administration does.”

Trump’s return to power is a moment of risk for Mr Starmer’s Labour administration because his party is closely aligned with the outgoing Democrats, and many members of his Cabinet have criticised the President-elect in the past.

Moreover, with the UK economy flat-lining, any trade frictions imposed by the new US administration are likely to put in danger what the Premier has described as his core mission in government – to spur growth.

Trump’s inauguration comes at a delicate time for the six-month-old British government, which is vying with Mr Nigel Farage’s insurgent right-wing Reform UK Party for the lead in the polls after a rocky return to power.

First, the new administration was hit by a scandal over senior Labour figures accepting freebies while in opposition, and then Ms Reeves alienated businesses, pensioners and farmers with a series of budgetary decisions.

Earlier in January, the chancellor faced questions about her future as Britain grappled with global market turmoil that sent borrowing costs to their highest level since the financial crisis in 2008 and saw the pound tumble to a 14-month low.

By the end of last week, though, the pressure abated as inflation undershot forecasts, the markets stabilised and the International Monetary Fund upgraded British growth forecasts a notch. 

Ms Reeves and Mr Reynolds will now head to the World Economic Forum in Davos, Switzerland, this week, seeking to woo foreign investors and boost British business. 

When it comes to trade, Mr Jones expressed optimism in a Sky News interview that Trump will not impose tariffs straight away, later telling the BBC that Britain has a “different relationship” with the US than other countries whose trade surpluses with the world’s largest economy the President-elect has talked about. 

American figures suggest the US had a physical goods trade surplus with Britain of about US$10 billion (S$13.7 billion) in 2023 – a balance that may deter the incoming Trump administration from potentially damaging the relationship with new tariffs.

British figures, by contrast, suggest a smaller surplus in favour of the UK. 

When asked by the BBC if he thought a trade deal is possible, Mr Jones replied “yes”, adding that Mr Starmer and Trump have already discussed the matter, while the incoming administration’s transition team has also met with senior British representatives. 

“There are definitely opportunities to deepen our trading relationships, not least in areas, for example, in technology, and science, and research,” Mr Jones said.

“We’re keen to pursue those opportunities with the new administration, and I think that’s something that could be a positive outcome.”

Despite the optimistic tone, Mr Starmer’s government has gotten off to a shaky start with Trump, whose legal team accused Labour of “blatant foreign interference” and illegal foreign campaign contributions to Democratic presidential candidate Kamala Harris during the vote in 2024. 

That was on top of a lengthy list of Labour figures criticising the President-elect, including Foreign Secretary David Lammy, who once called Trump “a woman-hating, neo-Nazi-sympathising sociopath”.

On Jan 18, in an article in the Observer online touching on Trump and far-right parties in Europe, another leading Labour politician, London Mayor Sadiq Khan, warned that “the spectre of a resurgent fascism haunts the West”. 

Mr Jones said he disagreed with those remarks, telling the BBC: “I speak on behalf of the government, and we don’t agree with it. President-elect Trump has an important mandate of the United States, and we look forward to working with him in the interests of both of our economies.”

In a statement issued late Jan 19, Mr Starmer offered his “warmest congratulations” to Trump and said the “uniquely close bond” between Britain and US would endure.

“We will continue to build upon the unshakable foundations of our historic alliance as we tackle together the global challenges we face and take our partnership to the next level focused on shared opportunities ahead for growth,” he said. BLOOMBERG