Keir Starmer has issued his most stern warning to date to President Trump as threats of damaging tariffs grow larger.
The Prime Minister has said a ‘retaliation’ (meaning counter tariffs) is on the table if he thinks it is ‘in the national interest’ to do so, promising to approach the situation with ‘sharp teeth’.
A No 10 source said: “We are preparing for all eventualities. There’s lots of scenario planning. Everything’s being done properly and thoroughly. But ultimately, the whole thing is entirely unpredictable.
“We reserve the right to a retaliation process if that’s what we think would be in the national interest, and we’d work with industry on doing that. We’ll be approaching this with cool calm heads, but sharp teeth.”
Starmer has warned Trump he is approaching the situation with 'sharp teeth'
PA/REUTERSIt comes as Donald Trump plans to slap sweeping tariffs on goods from all countries on Liberation Day, April 2.
Amongst Trump’s plans is a 25 per cent import tariff on cars, Britain’s biggest physical export to the US last year.
Such moves would severely impact the UK economy and almost certainly wipe out the narrow £10billion fiscal headroom Chancellor Reeves just rebuilt in her Spring Statement.
The Chancellor’s bombshell October budget raised taxes by £40billion, sparking an exodus of wealth, a hiring slump and crashing business confidence while inflation and borrowing costs remained stubbornly high.
All-important growth failed to materialise, and the Chancellor’s headroom was wiped out forcing her to announce major measures in her Spring Statement last week.
Trump's plan of new tariffs have sent shockwaves through the stock marketsGETTY These included slashing the welfare state and civil service, a tax evasion crackdown and major planning reforms.
These measures reinstated the ‘sliver’ of headroom the Chancellor originally attempted to leave herself, but Trump may torpedo that on April 2.
However, the UK is hoping to avoid this and talks for a UK-US economic prosperity deal are ratcheting up.
Keir Starmer and Donald Trump spoke on the phone last night and both have indicated talks will continue up until the last minute.
If Britain fails to negotiate an exemption, the two nations are expected to begin bartering over individual measures like the digital services tax, chlorinated chicken, or even Harley Davidson motorbikes.
Financial services are by far the biggest export from the UK to US in monetary terms, so tariffs on this would be seen as a ‘nuclear option’ by both sides, though it is difficult to tariff the flow of information.
A City source close to the negotiations said: “The relationship between the UK and US financial and related professional services industries is the strongest, deepest and widest of its kind anywhere in the world, and we expect that to continue.
“Indeed, there is appetite on both sides in the private sector to look at how we can deepen it further.”
The US enjoys a trade surplus with Britain, as we import more goods from the US than we exportFacts4EU Exporting chlorinated chicken to the UK is considered off the table due to its high profile in Britain.
Harley Davidson, the famous US motorbike manufacturer, is also thought to be an export/import market caught up in negotiations.
However, Andrew Griffith, the shadow business secretary, accused Labour of leaving Britons exposed and “dropping the ball” on a potential US trade deal.
“You would think, faced with such a prospect, Labour would have made securing a trade deal with our US ally their number one priority.
“Yet six months have passed since Kemi Badenoch, in her first PMQs, urged Keir Starmer to get that deal over the line, and still there’s precious little sign of progress,” said Griffith.
Home Secretary Yvette Cooper was asked yesterday how damaging Trump tariffs could be, to which she said: “In the end, if you increase barriers to trade right across the world, that’s not good for the world economy, let alone any individual country as part of that.
“So that’s why our approach to this has been to try and seek new trade agreements across the world, including improving our trading relationship with the EU as well as with the US.”
“We obviously can’t keep a running commentary on different discussions that are taking place, but we have to always make sure that we’re acting in the national interest.”
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Wall Street has doubled the chance of the US economy sliding into recession this year
GETTYIt comes after global stock markets plunged this morning after Donald Trump announced plans to impose tariffs on all countries, with major indices like Japan’s Nikkei 225 and South Korea’s Kospi dropping sharply.
He also threatened tariffs on Russian oil, expressing anger over Vladimir Putin's demand for Volodymyr Zelensky's removal as a condition for peace talks.
Wall Street has doubled the US's recession warning this morning with Moody’s, the credit ratings agency, raising the odds of a recession in the world’s largest economy to 40per cent, up from 15per cent at the start of the year.
Goldman Sachs, the investment bank, said the probability of a recession had hit 35per cent, up from 20per cent.