Jonathan Reynolds has said it is a time for “cool heads” as the UK engages with the US over tariff plans despite holding a “different set of views” on trade policy.
It comes after Chancellor Rachel Reeves said the UK is not planning “at the moment” to introduce retaliatory tariffs on the US, after President Donald Trump imposed a new trade tax on car imports.
A 25 per cent tariff on vehicles imported to the US will come into effect on April 2, Trump announced on Wednesday, which saw shares in carmaker Aston Martin drop by around six per cent shortly after the London Stock Exchange (LSE) opened on Thursday morning.
The business secretary told a conference held by think tank Chatham House that: “With the US, we’ve said that obviously we have a different set of views to where they’re coming from… you can understand and engage with that even if you don’t necessarily agree with it.”
Decisions in the US come from a “belief on their side that it hasn’t got the right tools to deal with particularly overcapacity, and overproduction in some key sectors”, he said.
He added: “This is a time for cool heads and pragmatism and this is how we’re approaching these things.”
UK trade strategy
The minister admitted that there were “concerns and tensions”, but also said that “the basis of a UK trade strategy has got to be in the UK’s national interest”, adding: “I can’t fight battles for other countries.”
Earlier Reeves told Sky News: “We’re not at the moment at a position where we want to do anything to escalate these trade wars.
“Trade wars are no good for anyone. It will end up with higher prices for consumers, pushing up inflation after we’ve worked so hard to get a grip of inflation, and at the same time will make it harder for British companies to export.
“We are looking to secure a better trading relationship with the US. I recognise that the week ahead is important. There are further talks going on today, so let’s see where we get to in the next few days.”
Trade deal calls
While shadow Chancellor Mel Stride said it is “very important” the UK has a trade deal with the US “that means we are protected from those tariffs”.
And the Liberal Democrats called on the government to “toughen up” and start placing retaliatory tariffs on US carmakers like Elon Musk’s Tesla.
The tax on cars is on top of a series of reciprocal tariffs set to take effect on April 2, which could include a general 20 per cent levy on UK products in response to the rate of VAT.
Assessing the UK economy, watchdog the Office for Budget Responsibility (OBR) warned a full-blown tariff war with the US could wipe one per cent off GDP next year and derail Reeves’s hopes of balancing the books, forcing her to implement more cuts or tax hikes.