Trump tariffs newest: Trade conflict could blow $1.4tn gap in world financial system as Lammy says UK ‘preparing for worst’

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.

A member of the OBR’s Budget Responsibility Committee said US tariffs at 20 or 25 per cent maintained on the UK for five years would “knock out all the headroom the government currently has”.

Giving evidence to the Treasury Committee on the spring statement, David Miles said: “If tariffs at 20, 25 per cent were put on the UK and maintained for five years, our assessment of what that does is that it will knock out all the headroom that the government currently has.

“Had we made that a central forecast, and had the government not changed policy at all knowing that we were going to take that as our central forecast, then the headroom would have pretty much all gone.

“Of course that would have been in some ways, a very extreme assumption. Because not only would that be as bad as people might expect in the very near term, but it would have been maintained for five years, which is beyond the next presidential election in the US.”

Mr Miles said a “very limited tariff war” that the UK stays out of could be “mildly positive” for the country.

He added: “There’s a bit of trade that will get diverted to the UK, and some of the exports from China, for example, that would have gone to the US, they’ll be looking for a home for them in the rest of the world.

“And stuff would be available in the UK a bit cheaper than otherwise would have been. So there is one, not central scenario at all, which is very, very mildly potentially positive to the UK. All the other ones which involve the UK facing tariffs are negative, and they’re negative to very different extents.”

Our political correspondent Archie Mitchell writes:

Kemi Badenoch has gathered journalists in the ground floor of Tory HQ in a room that feels more like a classroom than a venue for a major political party’s conference.

The Independent has been shunted into a faraway corner because the room is not big enough to seat the relatively modest audience that has shown up to hear from the Conservative leader while giving everyone a decent view.

The party’s lack of funds has long been a talking point in Tory circles, with swathes of head office staff being made redundant to shore up the party’s finances.

And today’s presser is a sign of how badly the party is struggling. Not only could they not rent out a suitable venue to host journalists, they could not get a usually friendly think tank or donor to put them up in a more appropriate spot.

It seems Britain is not alone in being caught off guard over Donald Trump’s upcoming tariffs, after their hopes of reaching an economic agreement with the US to avert import taxes on UK goods were reportedly dashed over the weekend.

Speaking to reporters at the White House on Monday, the US president declared that he had “settled” on his so-called “Liberation Day” plans, adding: “Relatively speaking, we’re going to be very kind.”

That is claimed to have come as news to White House aides, however, who were under the impression that Mr Trump had not yet committed to a set strategy and that conversations remained fluid, sources told the Wall Street Journal.

It’s worth a note over a few big fallers in the UK over the past couple of days – as they’re not all due to potential incoming tariffs.

Pets at Home fell more than 12 per cent yesterday after a profit warning, before rebounding somewhat in the afternoon.

Builder merchant Travis Perkins is down more than seven per cent today after reporting falling revenue and a £77m pre-tax loss. They are also looking for a new CEO, after the health-related departure of Pete Redfern.

And John Wood Group shares fell by almost a third yesterday after reporting issues with their accounts – they expect their shares to be suspended from trading in due course due to a delayed filing.