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Sir Keir Starmer has instructed his cabinet to brace for a potential new wave of US tariffs affecting the UK on Wednesday. Despite this, Downing Street remains optimistic about securing a trade deal that would leave Britain in a favorable position compared to the EU.
US officials have hinted that President Donald Trump may offer special treatment to Britain, partly due to Starmer’s willingness to compromise on a digital services tax impacting American tech companies.
Business lobbyists engaged in trade discussions with Washington speculate that Britain could face baseline tariffs ranging from 10 to 15 percent, while the EU might encounter tariffs between 20 and 25 percent.
Although a “term sheet” for a UK-US economic deal is ready, British officials anticipate potential tariffs imposed by Trump on Wednesday. They are uncertain about the president’s response to the UK’s offer, possible concessions, and the timeline for reaching a deal.
One UK official involved in the negotiations mentioned, “It’s evident that they intend to treat us differently, sooner or later.” A US official confirmed that Britain would ultimately receive lower reciprocal tariffs compared to the EU.
Starmer is hopeful of securing a beneficial deal due to the UK’s balanced trade relationship with the US. The prime minister maintains regular communication with Trump, with their most recent conversation taking place on Sunday.
Britain has proposed eliminating or reducing its digital services tax and discussed lowering tariffs by 20 percent on certain fish and seafood products labeled as “high” by the US government.
However, Starmer has affirmed that he will not compromise on Britain’s food standards regime, which prohibits the import of chlorine-dipped chicken and hormone-treated beef.
The prime minister has cautioned the cabinet to anticipate negative news regarding tariffs when Trump announces his plans on Wednesday. Despite this, discussions on a potential trade deal will continue.
Business and trade secretary Jonathan Reynolds described the situation as “a very serious and significant moment” for the UK, expressing concerns about the potential economic disruption and impact on public finances from a trade war.
Chancellor Rachel Reeves updated the cabinet on the expected consequences of US tariffs after speaking with her US counterpart Scott Bessent. She emphasized that global tariffs would affect the UK as an open trading economy, suggesting that securing a deal could mitigate some of these effects.
Reeves and Starmer are firm in their stance that the UK should refrain from immediate retaliation, fearing exacerbation of the situation.
The Office for Budget Responsibility reiterated a warning that Reeves’ fiscal headroom of £9.9 billion could be depleted if Trump initiates a full-scale trade war. US tariffs ranging from 20 to 25 percent on UK goods could eliminate the government’s financial flexibility if upheld for five years.
Starmer is facing pressure after months of diplomatic efforts with Trump yielding minimal results. The Liberal Democrats urge Starmer to collaborate with Canada and the EU against Trump’s trade war, proposing retaliatory tariffs if necessary.
Deputy Prime Minister Angela Rayner defends engaging with Trump as being in the national interest and dismisses calls to cancel a potential second state visit for the US president as “ridiculous.”
Meanwhile, Reynolds refuted claims that US concerns about free speech in Britain influenced trade talks, clarifying that such issues were raised by the state department rather than trade negotiators.
Reynolds emphasized the gravity of the situation, stating, “That’s why we have been resolute in pursuing our national interest and positioning the UK favorably to navigate these pressures.”
The government is devising strategies to mitigate the repercussions of potential tariffs. Reynolds announced plans to implement anti-dumping measures to prevent the influx of cheap goods diverted from the US market.
He expressed readiness to impose quotas and tariffs on specific products to safeguard British companies against the dumping of heavily discounted goods originally intended for the US.
Reynolds noted that Britain had already imposed quotas and 25 percent tariffs on certain steel and aluminum products following Trump’s previous levies on the sector.