UK stocks experienced a significant decline today, paralleling global market turmoil fueled by escalating concerns over Donald Trump‘s trade policies, as Keir Starmer‘s ambitions of escaping tariffs fade.
Anxiety is mounting that Mr. Trump will impose a 20 percent tariff on both allies and adversaries on what he has termed ‘Liberation Day’, April 2.
The president has voiced concerns about the United States being taken advantage of by other nations, singling out VAT as an unjust foreign tax—despite it being applied to all sales, not just imports.
The looming threat of a trade war potentially leading to a recession is inciting widespread panic in global stock markets, with Asian markets experiencing a steep drop overnight, and the FTSE 100 falling by 0.75 percent at the open this morning.
Last week, the Treasury’s OBR watchdog projected a scenario involving 20 percent tariffs coupled with retaliatory measures, warning it could trigger an inflation spike and reduce growth by 0.6 percent this year and 1 percent in 2026-27.
Sir Keir has been negotiating for a UK exemption as part of a broader agreement, contending that trade between the two nations is already balanced.
Despite his efforts, he has not been able to prevent tariffs on steel, and government officials appear increasingly resigned to the inclusion of the UK in the tariffs, at least in the initial phase.
Downing Street is reportedly contemplating imposing additional duties on US products such as Jack Daniel’s whiskey, Harley Davidson motorcycles, and Levi’s jeans.
Keir Starmer and Donald Trump have held trade talks amid a frantic bid to dodge US tariffs
The prospect of a trade war has been causing near-panic on global stock markets, with Asia down sharply overnight – and the FTSE 100 dropping 0.75 per cent on opening this morning
The Nikkei 225 index was down more than 4 per cent overnight as investors took fright
The American S&P index has been continuing its decline as the confirmation of Mr Trump’s tariffs nears
The Treasury’s OBR watchdog modelled ‘scenario 3’ of 20 per cent tariffs with retaliation last week, warning that it would spark a UK inflation surge and wipe 0.6 per cent off growth this year and 1 per cent in 2026-27
Downing Street is said to be considering retaliating with extra duties on US goods such as Jack Daniel’s whiskey, Harley Davidson motorbikes and Levi’s jeans
Sir Keir, pictured at an immigration conference in London this morning, has said the UK ‘reserves the right’ to introduce reciprocal tariffs on the US if a deal to exempt the UK cannot be reached
The US leader has already confirmed a 25 percent import tax on all vehicles entering the United States, a policy that is poised to impact British luxury car manufacturers like Rolls-Royce and Aston Martin.
Market turbulence intensified overnight when Mr. Trump hinted at the possibility of ‘reciprocal’ tariffs globally.
This could entail a 20 percent baseline tariff on all imports, instead of targeting specific countries based on their tariffs.
‘We would start with all nations; let’s observe the developments,’ Mr. Trump remarked to journalists aboard Air Force One.
In reaction, investors flocked to sovereign bonds and the Japanese yen, while gold prices skyrocketed to new record highs.
S&P 500 futures dropped by 0.8 percent, following a steep decline from Friday, while Nasdaq futures fell by 1.4 percent.
Mr. Trump has identified the EU as a primary target, expressing resentment that the bloc was established to ‘screw’ America. Brussels has committed to retaliatory measures.
Nevertheless, the UK currently applies a 20 percent VAT on most products and services.
A spokesperson from No10 commented on the conversation between Sir Keir and Mr. Trump last night, stating: ‘They talked about the fruitful discussions between their respective teams concerning a UK-US economic prosperity deal, agreeing to continue the negotiations at an accelerated pace this week.’
In its forecast accompanying the Spring Statement last week, the OBR considered the potential of the US implementing blanket 20 percent tariffs alongside equivalent retaliatory actions from trade partners.
It indicated that while the exact results are ‘uncertain’, UK consumer price index (CPI) inflation could rise by 0.3 percentage points.
The challenges posed by heightened inflation on real income and a deceleration in global growth are ‘expected to cause GDP to quickly dip below our primary forecast.’
This would reduce the growth estimate for the year from 1 percent to merely 0.4 percent and could decrease next year’s growth by 1 percentage point.
‘The potential for increased global trade barriers and decreased global productivity suggest that the medium-term UK GDP could be approximately 0.75 percent less than our central estimate,’ the report stated.
The National Institute of Economic and Social Research (NIESR) had previously projected that a 20 percent ‘reciprocal’ tariff could subtract 0.4 percentage points from UK economic growth over the next two years—translating to about £24 billion.
This situation could significantly disrupt the Government’s economic growth plans, especially after Rachel Reeves struggled to align the budget with cuts during last week’s Spring Statement.
The Treasury’s OBR watchdog cautioned that her £9.9 billion headroom—which is historically low—could easily be obliterated by Mr. Trump’s trade initiatives.
Mr Trump has vowed to hit foes and allies alike with levies on so-called ‘Liberation Day’, April 2
Ministers say they could bring in their own tariffs on US imports this week. This could affect popular goods like Jack Daniel’s whiskey, Levi’s jeans and Harley Davidson motorcycles.
Sir Keir has affirmed that the UK ‘reserves the right’ to enact reciprocal tariffs against the US if a mutually beneficial agreement cannot be reached.
However, the OBR has indicated that the repercussions of applying reciprocal tariffs against the US may adversely affect the UK more than allowing the tariffs to take effect without intervention.
Considering the negotiations, it has been suggested that scrapping or reducing the digital services tax on major tech firms—such as social media platforms, search engines, and online marketplaces—could be on the table.
Downing Street reported that Mr. Trump extended his best wishes to the King, who has recently had to cancel events due to side effects from his cancer treatment.
