Donald Trump has declared today – April 2 – will be ‘Liberation Day’ for the US, when his country will shake off any reliance it has on other countries for products and supplies.
But in the rest of the world – and for many in the US itself – the prospect of sweeping, scattershot, international tariffs being introduced all at once conjures feelings of dread rather than freedom.
For the UK, it’s more than a little embarrassing too.
You may remember that at the end of February, Keir Starmer travelled to the White House just after announcing a big increase in defence spending (partially to appease the US) and offered Trump a second state visit.
At the moment, it seems those efforts have not borne fruit. The PM has admitted it’s likely the UK would not be spared from the President’s tariffs.
Ahead of Prime Minister’s Questions today, he told MPs: ‘A trade war is in nobody’s interest, and the country deserves and we will take a calm, pragmatic approach.
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‘That’s why constructive talks are progressing to agree a wider economic prosperity deal with the US. That’s why we’re working with all industries and sectors likely to be impacted.
‘Our decisions will always be guided by our national interest, and that’s why we have prepared for all eventualities and we will rule nothing out.’
How will Trump’s tariffs affect the UK?
This will likely mean a rough start to April for many Brits will only become rougher.
On April 1, a raft of tax and bill increases came into effect – energy bills, water bills, phone bills, broadband bills, TV licences, council tax and car tax are all going up. Businesses have warned a rise in National Insurance Contributions kicking in this week will also force up prices.
A simultaneous increase in the minimum wage and living wage will mitigate the impacts for some, but there’s no doubt life in the UK is getting more expensive.
What are tariffs and what impact do they have?
A tariff is a tax on imported goods from other countries.
Companies that bring in items from overseas – in order to sell them or use them in the manufacturing process – pay these taxes to the government.
If you listen to Donald Trump describing them, they might sound like a silver bullet that will save the US economy. He says his tariffs will encourage customers and firms to buy US products.
But the reality is more complicated.
Businesses that want to avoid tariffs could take years to rearrange their supply lines, and in the meantime, it’s not unusual for them to pass on their higher prices onto customers.
That doesn’t just affect US businesses either – it’ll have an impact on UK businesses that deal in the US too.
Even if other countries don’t retaliate by imposing their own import taxes on the US – as several of them have said they will do – the interconnected nature of global trade means prices could rise around the world.
Part of the reason Trump’s tariff threats are concerning figures in the British government so much is because of the uncertainty around them.
We already know a 25% tariff will be introduced on all cars being imported to the US, a move that will hammer the British automotive industry.
But there’s a conspicuous lack of detail on the broader round that has been promised. Speculation suggests Trump may choose to respond to the rate of VAT by imposing import taxes of 20% on the UK.
If that happens, business will suddenly get a lot more expensive for many British firms, and that will mean further price rises for customers.
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Is the UK imposing its own tariffs on the US?
Then there’s the question of whether the UK will choose to reciprocate on any tariffs that are imposed, as many other countries have said they will do.
Starmer has said ‘all options remain on the table’, but emphasised his hopes that a trade deal will be struck with the US.
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Economists at the Office for Budget Responsibility, the official body that checks the Treasury’s numbers, have warned placing our own tariffs on US goods would damage the UK’s finances even further.
And that’s a risk the government desperately wants to avoid. Last Wednesday, Chancellor Rachel Reeves announced her spring statement with a bruising series of cuts to benefits and a relatively small amount of headroom.
If the worst-case scenario plays out, she could end up almost back at square one just a week later.
Like everyone else, she will find out exactly what the tariffs entail at 9pm tonight, when Trump delivers a bombshell speech which he’s decided to call Make America Wealthy Again.
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