Business Secretary worried about US tariff war that would hit the public

Business Secretary Jonathan Reynolds has said he is worried about a potential trade war after Donald Trump returns to the White House and stressed that tariffs are “paid for by your own people”.

Mr Trump has signalled he is willing to introduce tariffs on goods coming from Canada and Mexico, two of the US’s biggest trading partners, as well as China, in a bid to protect America’s homegrown industries.

In recent days, the president-elect has spoken of establishing a new US government agency tasked with collecting revenue from tariffs.

Financial markets around the world have started to react to the possibility the trade taxes could be applied more widely, which is believed to have influenced a spike in Government borrowing costs in the UK.

“It’s going to be a challenging time for anyone who is responsible for trade in a big economy because of some of those pledges that were made in the campaign,” Mr Reynolds told Sky News of Mr Trump’s return.

Asked if he was worried about a tariff war, he said: “I am, because the UK is a very globally-orientated economy, so the exposure, the danger to the UK is actually greater than even some comparable countries around that.”

He added: “Ultimately, tariffs are paid for by your own people. So, it’s got real pressures in terms of inflation, in terms of your ability to employ people, to export to other markets.”

He said the UK had been engaging with the incoming administration and was “well prepared” with a “good argument to make” in trade talks, adding he thinks there is a “chance to get an even better relationship”.

Lib Dem leader Sir Ed Davey, meanwhile, will give a speech calling for the UK to negotiate a new UK-EU customs union to come into force by 2030 rather than “tinkering around the edges of the botched deal the Conservatives signed four years ago”.

Sir Ed will argue that negotiating a new “UK-EU customs union” is “the single biggest thing we can do to turbocharge our economy in the medium and long term”.

Mr Reynolds said the Lib Dems “only ever think about Europe” instead of the “wider global position”.

He said: “So, the EU is our major export market, about £800 billion worth of trade between the UK and the EU every year. The US is after that of £300 billion. So, you see the importance of the EU.

“I think that the problem, to be frank, for the Lib Dems is they only ever think about Europe. Of course, it’s a major market, but this is a Government that wants to improve that relationship with the EU, but also wants to do work with the US, with India, with the Gulf,” he told BBC Breakfast.

“I think the UK could be positioned as the best economy between those major trading blocs. I think what the Lib Dems are saying today – it’s not taking into account that wider global position.”

Prime Minister Sir Keir Starmer has committed to strengthen ties with the EU and said he wants a “better deal” for Britain post-Brexit, but has repeatedly ruled out rejoining the single market or customs union.

Experts have warned that securing fewer trade barriers will be challenging in any event without the UK Government being prepared to offer its own concessions.

A think tank has urged the Government to offer the “olive branch” of a trade deal to the Trump administration as well as seeking to renew EU trade ties.

The Institute for Public Policy Research (IPPR) think tank has close links to Sir Keir Starmer’s Downing Street, with several senior figures at No 10 having joined the Government from it.

Marley Morris, associate director at the IPPR, who wrote the report, said a new trade strategy should develop a new programme of export support, rebuild UK-EU trade relations and modernise our approach to trade agreements.

“The new Trump presidency is particularly delicate for the UK. The Government will need to on the one hand offer an olive branch by signalling appetite for an ambitious trade deal, while at the same time strengthening the UK’s trade defences to brace for a potential tariff war,” he said.

“With the right focus on boosting green growth, securing economic resilience and rebuilding vital relationships, the UK can turn the tide and reclaim its place as a leader in global trade.”