US President Donald Trump has unveiled a new wave of import tariffs, escalating global trade tensions and raising concerns among key trading partners.
While the UK faces a comparatively lower 10% tariff, the implications are still serious, particularly for a trade-dependent nation already grappling with economic decline, rising unemployment, and a growing tax burden.
The UK economy, still reeling from the aftershocks of the 2020 Covid pandemic, now faces yet another blow that could deepen the crisis.
Small and medium-sized enterprises (SMEs), many of which rely on exports to the US, are particularly vulnerable. Some are already preparing to halt shipments due to the added costs.
The situation could worsen significantly if Trump confirms a proposed 25% blanket tariff on car imports. According to a new report from the Institute for Public Policy Research (IPPR), such a move would severely impact the UK’s car manufacturing sector, threatening thousands of jobs, slowing economic growth, and putting immense strain on local communities.
China has warned it will retaliate if President Donald Trump enforces a proposed 50% tariff on Chinese imports, vowing countermeasures to protect its interests. The move heightens tensions in an already fragile global trade landscape.
The ripple effects are being felt worldwide. In the UK, political leaders are ramping up efforts to protect national interests and shield key industries from the fallout of escalating US tariffs. With stock markets tumbling and investor confidence faltering, economic experts are warning of a potential recession on the horizon.
As a trade-dependent nation, the UK faces a delicate balancing act—maintaining strategic relations with the US while also strengthening ties with other global partners to mitigate the impact of mounting trade tensions. Navigating this turbulence will require diplomatic agility and strong economic planning to safeguard long-term stability.
Leaders hits back at Trump tariffs, eyes national interest first
Several leaders have voiced strong opposition to the new US tariffs, warning of their impact on British industries. They have pledged to respond firmly but pragmatically—prioritising national interest, protecting jobs, and ensuring continued economic resilience amid rising global trade tensions.
Prime Minister Keir Starmer used Jaguar Land Rover’s (JLR) owned by Indian company-Tata Motors UK headquarters in Solihull as the stage for a major economic speech, addressing growing uncertainty following US President Donald Trump’s new global trade tariffs.
Calling JLR a symbol of “British brilliance,” Starmer praised the UK’s manufacturing workforce and pledged full government support during turbulent times. He acknowledged the serious threat posed by the US-imposed 25% tariff on car exports: “Nobody is pretending that tariffs are good news... 25% on automotive exports is a huge challenge to our future.”
However, he framed the crisis as part of a broader transformation: “It’s a changing and completely new world – an era where old assumptions no longer apply.”
Starmer promised a radical overhaul of government to support British industry, including faster housing, infrastructure and industrial growth. On global trade, he said, “We will accelerate trade deals across the globe, but when it comes to the US – I will only strike a deal if it is in the national interest.”
Rejecting the idea that British industry is in decline, he said, “Anyone who says Britain doesn’t make anything anymore – I invite them to come here. They won’t say that again.”
The Prime Minister also unveiled sweeping changes to support the UK’s shift to electric vehicles (EVs), including a 20% cut to industry fines, a delay to the hybrid ban until 2035, and a £2.3 billion investment in the car industry. “This is the moment we back British business and charge up the electric revolution,” he declared. He also promised to boost the life sciences sector, slashing clinical trial setup times and pledging up to £600 million for a new Health Data Research Service.
A statement from HM Treasury noted that Chancellor of the Exchequer Rachel Reeves warned the United States’ recent decision to impose tariffs could have significant implications for the global economy.
“These implications have already been reflected in the reaction we’ve seen in global markets,” she said. “The financial authorities are closely monitoring the situation.” Reeves confirmed that she had spoken to the Governor of the Bank of England, who reassured her that markets are functioning well and that the UK’s banking system remains resilient.
Acknowledging the concerns of families and businesses, Reeves said, “We have your backs.” She emphasised that the Government would not stand by amid global uncertainty but would “act decisively, in our national interest, to protect working people.”
On the risk of escalating tensions, she stated, “A trade war is in nobody’s interest. That’s why we must remain pragmatic, cool-headed, and pursue the best deal with the United States.”
On April 3, 2025, Business and Trade Secretary Jonathan Reynolds addressed the House of Commons in response to the United States' decision to impose a 10% reciprocal tariff on UK exports and a 25% global tariff on cars. In his statement, Reynolds released an indicative list of US-imported goods that could be targeted in a potential UK response. He also clarified that items of wider public interest—such as medical supplies and military-related products—would be excluded from any future tariff measures, providing businesses with a degree of certainty amid rising trade tensions.
“No country has been exempted, but the UK received the lowest reciprocal tariff rate globally,” Reynolds said. “While this vindicates the pragmatic approach this Government has taken, we know the job is far from done.”
Reynolds acknowledged the disappointment over the tariffs and the global impact they will have, but reiterated the Government’s commitment to acting in the national interest. “We are working hard to navigate these turbulent times and support all UK industries,” he said.
Talks with the US remain ongoing to secure a broader economic agreement. “There are clear synergies between our markets, and a deal is not just possible – it’s favourable to both countries,” Reynolds stated. “Industry leaders across key sectors welcome our cool-headed and constructive approach.”
Cautioning against reactionary measures, Reynolds added, “True strength comes in making the right choices at the right time. Escalating a trade war would serve no one.”
To ensure the UK is prepared, Reynolds announced a formal request for input from British businesses on possible retaliatory tariffs. “This will give businesses a chance to shape any potential UK response,” he explained, noting the consultation will run until May 1. “If a deal is reached, this process will be paused, and any measures lifted.”
Tariffs could force exporters to exit market
Industries have voiced concern over new US tariffs, warning they could make exports uncompetitive and force smaller firms to reduce or stop shipments to the US.
A spokesperson for the Scotch Whisky Association said, "The industry is disappointed that Scotch Whisky could be impacted by these tariffs. We welcome the intensive efforts by the UK government to reach a deal with the US administration, and we continue to support this measured and pragmatic approach towards a mutually beneficial resolution.”
A statement from the Food and Drink Federation said, “As the UK’s third biggest market for food and drink, we’re very concerned to see an additional 10% tariff imposed on exports to the US. UK food and drink exports to the US – from chocolate to tea and biscuits – are of exceptional quality and tend to be sold at higher prices than their US equivalents. The new, 10% tariff will impact exporters significantly, risking their profitability. We’re concerned that the tariffs will hit small and medium sized businesses disproportionately, who could be forced to withdraw from US sales altogether.
“We’re working closely with the government as it develops its thinking on how to respond and how to help businesses mitigate the impact of tariffs on their success in the US market.”
“UK is a trade-dependent economy, securing deals with the US is vital”
Pranesh Narayanan, Research Fellow at Institute for Public Policy Research (IPPR), explained the wider implications of the US tariffs and said, "Tariffs are essentially a tax on imports. The US has now imposed higher tariffs on goods from nearly every country. The rates are based on trade imbalances—so the more the US imports from a country relative to what it exports, the higher the tariff. The UK has received one of the lowest new tariff rates announced on April 2, but that’s on top of existing ones, particularly targeting cars, steel, and aluminium."
He continued, "The general tariff is 10%, but for cars it's now 35%. That’s significant for the UK, which mainly exports cars, pharmaceuticals, machinery, and military equipment to the US. Pharmaceuticals are exempt, but the car industry will be hardest hit. Even though the UK received a relatively better rate, the automotive sector faces major challenges."
An IPPR study estimates that around 25,000 UK jobs could be at risk from the proposed US tariffs on car imports. Speaking about the scale of the threat, Narayanan noted, "The US is the second-largest export market for UK-made cars. Over a third (35 per cent) of cars manufactured in the UK in 2024 went to the US. Now that those vehicles are 35% more expensive in the American market, it will be harder for companies like Jaguar Land Rover and Mini (owned by BMW) to stay competitive. These firms employ thousands in the UK, so the ripple effects could be serious."
Narayanan also warned of indirect consequences via Europe. He said, “Since the EU is our biggest trading partner, if its exports to the US decline due to tariffs, it could affect their income and reduce demand for British goods. This is one of the biggest shifts in global trade policy in a generation-it will have wide-reaching consequences.
On policy, he stressed the need for strategic economic resilience. Narayanan said, "The UK is a trade-dependent economy, so securing trade deals-especially with the US is vital. But just as important is strengthening the domestic economy. That means more public investment, a robust industrial strategy, and targeted support for sectors with growth potential."
"We need to use tools like the National Wealth Fund and the regulatory framework to shape the economy we want. Infrastructure investment-especially in transport and clean energy-is overdue and essential for supporting manufacturing. And finally, innovation funding must be targeted toward strategic sectors to boost long-term competitiveness," he added.
Chair of the International Chamber of Commerce (ICC) UK, Lord Karan Bilimoria said, “The United States accounts for only 13% of global trade. Surely, we should be working with the other 87% of countries around the world to make sure we continue with the rules-based multilateral trading system. This is the time when the UK needs to take leadership. As Chair of the International Chamber of Commerce (ICC) UK, the largest business organisation in the world with 45 million members in 170 countries, we are saying that this is the time when we must promote and modernise trade and plan for growth to unlock £25 billion in trade for the UK. We must digitise trade, where the UK can take the lead, and where transaction times can be reduced from three months to one hour, and with 80% reduction in trade transaction costs. This is the time for the UK to actually take the lead, but not pick a fight with the US. When it comes to services, our position with the United States is incredibly strong. We export $126 billion worth of services to the US, more than double what we import, which is around $57 billion. That gives us a significant trade surplus in this sector. And what’s crucial here is that these new tariffs don’t apply to services, which means our most competitive area remains untouched. Unlike countries that primarily export goods, we’re in a much better position because our economy is heavily driven by high-quality service exports -a space where we continue to lead globally.”
As per quote in BBC news, Dr Swati Dhingra, economist and member of the Bank of England's Monetary Policy Committee, noted that companies facing steep US tariffs might redirect their exports to markets like the UK, where tariffs are lower. This could result in a surge of cheaper goods entering the UK. She explained that tariffs of this scale are likely to push exporters to cut prices in order to maintain demand.
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Industry leaders warn of economic shockwaves from Trump’s tariffs
Since Liberation Day, former US President Donald Trump’s newly imposed tariffs have rattled global markets, reigniting trade tensions and raising fears of inflation and economic slowdown. In comments shared with Newspage, UK industry leaders have voiced serious concerns about the impact on supply chains, interest rates, and consumer confidence- and are urging the Bank of England to respond swiftly.
1) Bob Singh, Founder at Chess Mortgages commented: "Trump's terrible and terrifying tit-for-tat tariffs have made markets tremble and tumble since Liberation Day causing trade tensions. The effects of the tariffs will cause a shortage in supply of vital goods and lead to inflationary pressures worldwide. The question for the Bank of England Monetary Policy Committee is not whether to cut but by how much? Whilst the markets have penciled in a 25bps cut, 50bps could be a smart move to preempt any slowdown in the economy. Any inflationary pressures likely to be caused by rising energy prices is likely to be offset by lower cost of fuel. Lenders are already offering sub-4% pricing as swap rates head south, giving homebuyers a welcome Easter boost."
2) Rakesh Dua, CEO at DUA Accountancy & Business Consultancy commented: "Businesses and consumers desperately need a rate cut given the uncertainty and lack of growth, let alone the devastation of a trade war. So my view is the Bank of England simply cannot ignore this because a downward spiral caused by a lack of confidence will be much more brutal than inflationary risk. The tide is turning and the Bank of England needs to wake up before it turns into a tsunami where even late rate cuts cannot filter through for months and years to deal with the carnage caused from a challenging set of economic data and forecasts. NI increases coupled with employer confidence being so low will likely mean wage increases will come down, as will new vacancies."
3) Riz Malik, Independent Financial Adviser at R3 Wealth commented: "Things could deteriorate quickly if the sell off continues and global retaliation ramps up. Trump’s Liberation Day tariffs were designed to make a statement but may have underestimated the global fallout. If other nations hit back harder, the US risks isolating itself economically with serious consequences for markets worldwide."
