14th Feb 2025 06:34
(Alliance News) - The UK government faces questions on how it will respond to US President Donald Trump's latest trade announcement, which threatens to impose tariffs as a retaliation for charging VAT on US goods.
Trump announced on Thursday that he would impose "reciprocal tariffs" on all other countries, charging the same amount as levies imposed on American exports, claiming it was "fair to all".
The impact of the announcement on the UK was not immediately clear, but the policy published by the White House included VAT as a target for reciprocal tariffs.
On Thursday evening, senior minister Pat McFadden said the government would not "overreact" but "wait and see" whether the tariffs "actually come to pass".
The Chancellor of the Duchy of Lancaster told Sky News: "Sometimes tariffs are announced, a couple of days later, they are unannounced."
Saying there were still "a lot of unanswered questions" about the extent of the tariffs, he went on: "We took the decision… that we wouldn't breathlessly chase every headline that was coming out over the last month.
"I think that's the right decision."
The policy published by the White House on Thursday is a wide-ranging one, threatening retaliation not just for tariffs but for other non-tariff barriers and "unfair or harmful acts, policies or practices".
These include subsidies, "burdensome regulatory requirements" on US businesses and restrictions on animal and plant products, possibly including UK food standards that prevent the import of some US goods such as chlorine-washed chicken.
The policy also explicitly mentions "value-added tax" as an "unfair, discriminatory or extraterritorial tax", despite VAT being levied irrespective of whether a product has been imported or not.
Trump has announced a series of tariffs throughout the first few weeks of his presidency, including earlier this week imposing a 25% levy on steel imports.
But while his approach to international trade has frayed relations with some of the US's closest allies, particularly Canada, his announcements have not always proved permanent.
Having announced tariffs on Canada and Mexico, he later suspended these for 30 days following negotiations.
Canada and Mexico have readied retaliatory tariffs should the duties come into effect, as has the EU, which Trump has repeatedly threatened, while China has already taken retaliatory steps to a 10% tariff on its exports to the US.
But on Thursday evening, McFadden would not be drawn on whether the UK planned to retaliate, saying it was "premature" to talk about the possibility.
He said: "How mature would it be for me to walk into a studio five minutes after some announcements and say 'yeah, we're going to retaliate'?
"That's not the way you make policy.
"We will always stand up for the national interest, it's a government's duty to do that, but the best thing in the national interest is to maintain a good trading relationship with everybody that we need to maintain that with, right across the world."
Thursday's tariffs will not come into effect immediately, with Trump ordering his advisers to carry out investigations into other countries' trade practices before suggesting what measures to impose.
Following the announcement, the British Chambers of Commerce, BCC, warned that Trump's plans would "upend established trade norms" and cause "more cost and uncertainty for investors, businesses and consumers across the world".
But the BCC's head of trade policy, William Bain, urged the government not to "get sucked into a trade war of tit-for-tat tariffs, which could easily spiral out of control".
He added: "But it must make the most of the time available before the introduction of these tariffs to negotiate with the US on alternative arrangements.
"If they do not, then sectors such as automotives, pharmaceuticals and food and drink could be significantly hit as higher tariffs inevitably feed through into globally higher prices for consumers."
UK-US trade is worth around GBP300 billion per year, with Britain importing slightly more from the US than it exports to the country, a fact ministers hope will help secure exemptions from Trump's tariff regime.
Most of Britain's exports to the US are in the services sector, and it is unclear whether Thursday's tariffs include services, although the UK does export more than GBP8 billion worth of cars and more than GBP6 billion worth of pharmaceutical products to America.
By Christopher McKeon, PA Political Correspondent
Press Association: Finance
source: PA
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