LONDON — The ongoing trade tensions initiated by President Donald Trump are poised to affect Britain’s economy, even if the U.K. successfully negotiates a trade deal with the United States, cautioned Chancellor Rachel Reeves during a significant industry conference on Tuesday.
Reeves expressed her concerns, stating, “It’s absolutely the case that even if tariffs aren’t applied to the U.K. we will be affected by slowing global trade, by slower GDP growth and by higher inflation than otherwise would be the case.” Her remarks were directed at an audience of leading British manufacturers gathered at MakeUK’s National Manufacturing Conference in central London.
Impact of U.S. Tariffs on British Economy
The Chancellor’s comments were made in light of the Trump administration’s recent decision to impose a flat 25 percent tariff on goods imported from Mexico and Canada, along with an increase in duties on Chinese products from 10 to 20 percent. As Reeves pointed out, “We don’t want to see tariffs,” emphasizing the need for a fruitful trade relationship between the U.K. and the U.S.
Despite these challenges, Reeves noted that there is “every reason to be hopeful” about finalizing a trade agreement with the U.S. She highlighted that following Prime Minister Keir Starmer’s discussions with Trump at the White House last week, the U.K. is actively pursuing a trade deal that could mitigate the risks associated with Trump’s tariffs.
Defense Spending and Economic Strategy
Trump’s statements suggested a potential for a favorable trade agreement, indicating that the two nations “could very well end up with a real trade deal where the tariffs wouldn’t be necessary.” Nevertheless, duties on U.K. steel and aluminum exports are set to be imposed next week, with British goods facing reciprocal tariffs expected in April.
In anticipation of his meeting with Trump, Starmer committed to increasing defense spending to 2.5 percent of the U.K. GDP by 2027, a strategic move to strengthen the U.K.’s negotiating position. Reeves stressed the importance of ensuring that increased defense expenditures translate into support for British jobs and industries.
She also highlighted the government’s commitment to streamlining defense procurement processes, including a review of single-source contract rules. “Strong security is the bedrock of a strong economy,” Reeves remarked, underscoring the link between national security and economic stability.