It is “liberation” eve and as the United States prepares to lumber tariffs on some of its closest allies, one individual not feeling the emancipatory spirit is UK prime minister Keir Starmer.
“Liberation day”, in the MAGA lexicon, refers to the moment Donald Trump will announce the substance of his trade policy after weeks of speculative asides and non-committal commentary. Finally, we will know who and what will be cast in the long shadow of the US president’s trade barriers.
The expectation is that there will be few, if any, exceptions. That is the clear message of the UK government today.
Conducting the broadcast media round this morning, business and trade secretary Jonathan Reynolds indicated that his attempts to secure an exemption for the UK had failed. He told BBC Radio 4’s Today programme that Britain will be targeted on Wednesday, alongside every other country in the world.
According to reports, the White House has drafted a proposal for the US to impose tariffs of about 20 per cent on most imports to the world’s largest economy. Trump has already announced that a 25 per cent tariff will be introduced on all cars imported to the US — a measure which will be a blow to the UK’s automotive industry. Some 16.9 per cent of UK car exports were to the US last year, representing a total of more than 101,000 units worth £7.6 billion.
Reynolds nonetheless outlined his belief that the UK and US can still agree a bilateral deal to reverse the tariffs, and suggested one could be achieved within weeks or months. “I do believe the work we have done means the UK is in the best possible position of any country to potentially reach an agreement”, the cabinet minister clarified.
From the perspective of the UK government, Trump’s tariff regime poses three perilously intertwining diplomatic, political and economic challenges.
In diplomatic terms, Starmer has channelled a huge amount of energy into the UK-US “special relationship” since Trump seized the reins of Washington DC in January, for his second non-consecutive term. The substance of the PM and president’s conversations, including in the Oval Office earlier this year, have been focused on the fate of Ukraine. The UK government’s trade response — and Starmer insists all options are “on the table” — will need to reflect its diplomatic objectives. No 10 could well conclude that a forceful reaction risks angering the White House at a febrile geopolitical juncture.
Speaking this morning, Starmer duly suggested that the government will not issue a “knee-jerk” response. Echoing Reynolds, he confirmed that discussions on “economic deals” are continuing and “well advanced.”
Kemi Badenoch, the Conservative leader, also urged the government not to retaliate in a set-piece speech this morning. “We should not be engaging in a trade war or tit-for-tat retaliation — that makes everybody poorer”, she said.
Like Badenoch, Starmer will be cognisant of the Office for Budget Responsibility’s (OBR) warning in its assessment of the spring statement. In the most extreme scenario modelled by the fiscal watchdog, it is estimated that a global trade war could reduce UK GDP by 1 per cent. US tariffs on all goods imports would slash 0.6 points off the OBR’s forecast of 1.9 per cent GDP growth in 2026, the body assessed.
OBR officials expanded on this warning today, in an oral evidence session at the Treasury select committee. David Miles, a member of the watchdog’s budget responsibility committee, said US tariffs at 20 per cent or 25 per cent would “knock out all the [fiscal] headroom the government currently has” if they were maintained on the UK for five years.
This point raises the prospect that the government will need to use future fiscal events — in the vein of the one Rachel Reeves unveiled before the commons *checks notes* last week — to carve out additional leeway against the government’s fiscal rules.
The political difficulty of this position is manifest. If the government opts for tax rises in the autumn budget or beyond, Labour will be brought into conflict with its election pledges; if it opts for further spending cuts, expect aggressive conflict within Labour.
There are additional political considerations here. In February for instance, the prime minister promised Trump an unprecedented second state visit to the United Kingdom in a bid to exploit his Anglophilic instincts. Whenever this trip comes to pass, the optics could prove punishing if the US president’s tariff regime inflicts real harm on the UK economically — and the government politically.
Political pressure is also being applied on the prime minister’s left flank, with the Liberal Democrats urging the government to retaliate forcefully. In a press notice this morning, the Lib Dems called on Starmer to convene COBRA, which handles matters of national emergency or major disruption, to coordinate a response to the tariffs.
“The prime minister should call a COBRA meeting today to coordinate Britain’s response to Trump’s trade war — including plans for Tesla tariffs and emergency measures to boost demand in the hardest hit sectors”, Lib Dem foreign affairs spokesperson Calum Miller commented.
The line befits the Lib Dem’s prevailing anti-Trump strategy and is also — potentially unfortunately for the PM — a popular stance. According to YouGov polling published today, 71 per cent of Britons support the levying of retaliatory tariffs on the US.
And all this is before we consider the fact that today, 1 April, is price-rise day — with energy, water, internet, council tax and a host of other bills all going up, squeezing strained household budgets further and putting the cost of living crisis at the top of the agenda once more.
A trade war with the US, if one does come to pass, would only exacerbate the cost of living.
Starmer’s dilemma is profound. If a US-UK economic deal is not forthcoming, the PM lacks a response that can reasonably navigate his diplomatic, economic, political trilemma.
Of course, the details of a US-UK economic deal could themselves be controversial — on chlorinated chicken and speculated changes to the digital services tax (DST) to benefit US tech firms. Before one considers the fiscal implications of this latter point, politically, the Lib Dems would accuse the government of “appeasing” Trump and Elon Musk.
Suffice it to say, Trump’s “liberation day” will be anything but for the UK government. The shackles that define Starmer’s limited room for manoeuvre are secured as tightly as ever.
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