Trump tariffs newest: Global value of commerce warfare revealed as Lammy says UK ‘preparing for the worst’

Chancellor Rachel Reeves has spoken to her US counterpart ahead of the expected tariffs ordered by Donald Trump.

Sir Keir Starmer’s Cabinet was told this morning that the chancellor spoke to US treasury secretary Scott Bessent on Monday, according to a No 10 readout of the meeting.

Sir Keir also updated ministers on the US tariffs expected this week in response to any decision from the White House.

Downing Street suggested it is not right to draw a link between tariff negotiations and the invitation for Donald Trump to make a state visit to the UK.

Asked whether the invitation could be withdrawn if there is no deal, the PM’s official spokesperson said: “I wouldn’t draw any any link between the two. Obviously, the state visit is a matter for the Palace, as you know.

“You’ll have seen that the prime minister was delighted to extend His Majesty the King’s invitation for a historic state visit during his visit to to the White House.

“But when it comes to these talks, we’ll obviously continue to have these conversations. We’ll obviously continue them in the national interest, and we’ll obviously provide an update as and when we have one.”

Asked whether free speech laws would ever be on the table in negotiations over a US trade deal, the prime minister’s official spokesperson said: “The US is our closest ally, we’ll obviously talk to them about all areas of our relationship, as we do on security and defence, as we do on all issues that relate to US-UK special relationship.

“But when it comes to the trade talks, I think the business secretary said this morning he’s not aware of that featuring.”

Pushed on whether it could happen in the future, the spokesperson added: “I can’t see any context in which it would come up in trade negotiations or economic deal negotiations.

“Obviously, more broadly where we have discussions with the US on all issues that relate to our relationship, including areas of US concern, as well as UK concern, of course. But I can’t foresee a scenario where it features in trade and economic negotiations.”

Our political correspondent Archie Mitchell reports:

Kemi Badenoch has admitted she has not picked up the phone to JD Vance to urge the US not to hit Britain with damaging tariffs, despite having a friendly dinner with the vice president last year.

The Tory leader said she did not want to “cut across” the UK government’s trade talks on the matter. But, with the threat of Donald Trump’s import taxes looming, questions were raised about whether Ms Badenoch should have urged her influential friend to argue Britain’s case.

Ms Badenoch said: “I’m not cutting across what the government is doing. When I was in government, finding out the people in the opposition were trying to undermine the work that was happening was not the way to go about doing it.

“What we do is we speak publicly about what we want to see happen, and help the government course correct.”

Donald Trump is yet to reveal the full extent of his so-called “Liberation Day” tariffs, but his team have given a clear indication what to expect.

The measures will add to the 25 per cent tariff placed on imports of steel and aluminium to the US on all countries since March.

New global tariffs targeting auto parts used to make cars have now been confirmed after Trump delayed imposing 25 per cent on these goods from its neighbouring nations and China until the start of April.

Hundreds of reciprocal tariffs are also understood to have been drawn up by the Trump administration, which will be different for every country. These will consider factors like existing tariffs, trade balances and VAT for all of the US’s trading partners.

My colleague Albert Toth has more details here:

David Lammy has warned that the UK must “prepare for the worst” over tariffs from the US as “intense conversations” continue on a possible economic agreement.

Pressed in the Commons by Lib Dem MP Calum Miller that the “best step” ministers could take to support UK businesses would be “to start talks on a bespoke UK-EU customs union without delay”, the foreign secretary replied: “We are an open-trading nation. We have been that under successive governments.

“It’s hugely important at this time that we continue the intense conversations we’re having with the US administration on getting an economic agreement but of course we prepare for the worst – all options remain on the table, as the prime minister indicated again just yesterday.

“But it’s also right that the business secretary and I and others across government continue to engage with business and industry so we can give them the best support at what will be a turbulent economic time, not just for our own country but of course much of the world.”

Kemi Badenoch said she had not spoken to Republicans in the US to ask for the UK to be spared from tariffs.

The Conservative leader said she was “not cutting across” the government to speak to Republicans like JD Vance.

She urged against any retaliatory tariffs, saying they would raise costs for UK consumers.

“Making life more expensive for British consumers so that we can thumb our nose at Donald Trump is not the right way. We need to make sure that we keep the cost of living as low as possible for the British public,” she said.

The cost of European government borrowing has fallen slightly today as Euro zone bond yields dropped ahead of Donald Trump’s looming tariffs announcement and better-than-anticipated inflation data fuelled hopes of a European Central Bank interest rate cut later this month.

Germany’s 10-year bond yield – the benchmark for the euro zone bloc – fell 5 basis points to 2.679 per cent, but stayed off a month low of 2.659 per cent hit on Monday.

Italy’s 10-year yield meanwhile hit its lowest level since 5 March, slipping 8 bps to 3.785 per cent.

The head of the UK’s budget watchdog has said that uncertainty over US tariffs were among the things that contributed to a hit in business and consumer confidence in Britain.

Richard Hughes, chair of the Office for Budget Responsibility, was asked by the cross-party Treasury committee whether business and consumer confidence took a bigger hit after October’s budget than they had predicted in their forecast.

He said that confidence “didn’t behave the way we expected it” to in the second half of 2024, and said it “fell over”.

“There were a mix of factors that contributed to it, some of which were global including just the uncertainty about what the new Trump administration was going to do to things like tariffs,” said Mr Hughes. “You’ve seen falls in business confidence around advanced economies not just in the UK.”

Other factors included increases in energy prices, which have had an impact on inflation, he said.