UK 'at risk of £24bn tariffs' as Donald Trump stokes trade war with sweeping executive order

13 February 2025, 19:40 | Updated: 14 February 2025, 00:43

Trump announced that he would impose "reciprocal tariffs" on trading partners, opening new fronts in his trade war
Trump previously threatened he would impose "reciprocal tariffs" on trading partners. Picture: Getty

By Flaminia Luck

The UK is facing the possibility of £24 billion in tariffs after President Donald Trump signed a sweeping reciprocal deal targeting trading partners of the US in his latest executive order.

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"TODAY IS THE BIG ONE: RECIPROCAL TARIFFS!!!" Mr Trump posted on his social media site, Truth Social, ahead of his latest announcement hoping to boost US economic growth and employment.

"MAKE AMERICA GREAT AGAIN!!!"

The prospect of a dramatic hike on tariffs targeting international trading partners could send shockwaves through the world economy, possibly depressing growth while also causing inflation to intensify.

Mr Trump added he would host a media conference in the Oval Office revealing further details of the tariffs on Thursday afternoon.

Tariffs of this size would take off 0.4 percentage points off GDP growth over the next two years, according to Ahmet Kaya, of the National Institute of Economic and Social Research (Niesr), accounting for an estimated $30bn (£24bn) bill.

It is understood the rises will be customised for each country by April 1 - with the aim of creating new negotiations.

This latest move by the US President has stoked the flames of the emerging global trade war.

It comes as Trump, in the same breath, suggested Russia could be readmitted to the G7.

President Trump speaks in the Oval Office as he announces reciprocal tariffs
President Trump speaks in the Oval Office as he announces reciprocal tariffs. Picture: Getty

Mr Trump has maintained such tariffs will help to create domestic factory jobs, but most economists say they would effectively be a tax increase on US consumers that would add to inflationary pressures.

The president has openly antagonised multiple US trading partners over the past several weeks, levying tariff threats and inviting them to retaliate with import taxes of their own that could send the economy hurtling into a trade war.

Mr Trump has put an additional 10% tariff on Chinese imports due that country's role in the production of the opioid fentanyl.

He also has readied tariffs on Canada and Mexico, America's two largest trading partners, that could take effect in March after being suspended for 30 days.

On top of that, on Monday, he removed the exemptions from his 2018 steel and aluminium tariffs.

And he has mused about new tariffs on computer chips and pharmaceutical drugs.

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Trump slaps 25% tariffs on steel and aluminium imports

The European Union, Canada and Mexico have countermeasures ready to inflict economic pain on the US in response to Mr Trump's actions, while China has already taken retaliatory steps with its own tariffs on US energy, agricultural machinery and large-engine autos as well as an antitrust investigation of Google.

Mr Trump has not specified how he defines the term "reciprocal".

It is unclear whether his expected order would apply only to matching tariff rates or include other foreign taxes that he views as a barrier to exporting American goods.

The White House has argued charging the same import taxes as other countries do would improve the fairness of trade, potentially raising revenues for the US government while also enabling negotiations could eventually improve trade.

But Mr Trump is also making a political wager that voters can tolerate higher inflation levels.

Price spikes in 2021 and 2022 severely weakened the popularity of then-president Joe Biden, with voters so frustrated by inflation eroding their buying power that they chose last year to put Mr Trump back in the White House to address the problem.

Inflation has risen since November's election, with the government reporting on Wednesday that the consumer price index is running at an annual rate of 3%.

The Trump team has decried criticism of its tariffs even as it has acknowledged the likelihood of some financial pain.

TOPSHOT-CHINA-US-TARIFF-TRADE
Trump also announced tariffs on Canada and Mexico - America's two largest trading partners. Picture: Getty

It says that the tariffs have to be weighed against the possible extension and expansion of Trump's 2017 tax cuts as well as efforts to curb regulations and force savings through the spending freezes and staff reductions in billionaire adviser Elon Musk's Department of Government Efficiency initiative.

But an obstacle for this approach might be the sequencing of the various policies and the possibilities of a wider trade conflict stifling investment and hiring amid the greater inflationary pressures.

Analysts at the bank Wells Fargo said in a Thursday report that the tariffs would likely hurt growth this year, just as the extended tax cuts could help growth recover in 2026.

"Tariffs impart a modest stagflationary shock to an economy," the report said.

"The US economy entered 2025 with a fair amount of momentum, but we look for real GDP growth to downshift a bit over the next few quarters as the price-boosting effects of tariffs erode growth in real income, thereby weighing on growth in real consumer spending."