UK prepared to retaliate against US tariffs, No 10 sources say

According to sources in Downing Street, the UK will not hesitate to take retaliatory measures against US tariffs if necessary. The British government is currently engaged in final negotiations with the White House to address the potential 25% auto import tariffs, slated to take effect on April 2nd, as well as the broader threat of tariffs on other goods. This proactive stance underscores the UK's commitment to protecting its economic interests.

The British government is seeking an exemption, arguing that the trade relationship between the UK and the US is relatively balanced, unlike that of other countries. The British Prime Minister has stated that he does not want to be drawn into a trade war. US President Trump has introduced a series of tariffs on goods from other countries, claiming that these measures will help American manufacturers and protect jobs, despite warnings that this could lead to higher consumer prices and impact global trade dynamics.

US companies importing vehicles will begin paying tariffs from April 3rd, with tariffs on auto parts expected to begin in May or later. Government sources have indicated that the UK's negotiations for an exemption will not end after Trump's set deadline on Wednesday, with one source stating, "We won't stop trying." This demonstrates the UK's resolve to pursue a favorable outcome despite the challenging circumstances.

The potential retaliatory measures the UK might take if the tariffs take effect remain unclear. Possible options include imposing tariffs on industries in the US that are particularly important to British products, or targeting specific products, such as Harley-Davidson motorcycles. One expert told the BBC that the least likely but most "nuclear" option would be to target the financial services industry, which could have far-reaching consequences.

Despite the UK's threats, the British government does not want to start a trade war. British Prime Minister Keir Starmer said earlier this week that the UK would not "get drawn into" a trade war with the US, adding that the government is trying to avoid tariffs through "intensive negotiations" and will remain "pragmatic and clear-eyed" in its response. The government aims to de-escalate tensions and find a mutually acceptable resolution.

The independent Office for Budget Responsibility has warned that a reciprocal trade war would wipe billions of pounds off economic growth and almost eliminate the Chancellor's surplus left to comply with his self-imposed fiscal rules. Former Labour minister and chair of the House of Commons Treasury Select Committee, Meg Hillier, has warned that the government's commitment to free trade will be tested in the coming weeks due to Trump's tariffs. This highlights the potential economic ramifications of the trade dispute.

Trump has stated that the 25% tariff will bring "tremendous growth" to the industry and has promised that it will stimulate US jobs and investment. However, there are concerns that this move could lead to temporary shutdowns of US auto production, raise prices, and strain relationships with allies. The potential negative consequences outweigh the perceived benefits, raising questions about the long-term impact.

The US imported approximately 8 million vehicles last year, with a trade value of approximately $240 billion (£186 billion), accounting for about half of total sales. Mexico is the largest supplier of automobiles to the US, followed by South Korea, Japan, Canada, and Germany. According to the Society of Motor Manufacturers and Traders (SMMT), a UK automotive industry body, UK car exports are worth approximately £7.6 billion annually, with the US being the UK's second-largest market for cars, after the EU. These figures underscore the significant economic ties between the UK and the US in the automotive sector.

The SMMT stated that Trump's announcement was "not unexpected, but still disappointing." World leaders criticized the tariffs shortly after they were announced. German Economy Minister Robert Habeck said on Thursday that the EU must "respond decisively," while French President Emmanuel Macron called it a "waste of time" and urged Trump to reconsider. The international community is closely monitoring the situation and advocating for a resolution that avoids further escalation.

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