Rachel Reeves signals potential trade deal with the US, focusing on tariff reductions and EU ties

Chancellor of the Exchequer Rachel Reeves has expressed understanding of the concerns raised by President Donald Trump regarding global trade imbalances, ahead of critical discussions with her US counterpart, Treasury Secretary Scott Bessent, on Friday. Speaking during her visit to Washington, DC, at the 2025 annual IMF/World Bank Spring Meetings, Reeves highlighted the common ground between the US and UK governments, both of which have faced significant voter frustration over economic challenges.

Reeves, who is working diligently to secure a trade deal with the US, suggested that addressing tariffs would be a central focus of her upcoming talks with Bessent. “We’re all grappling with this issue of tariffs,” she stated, acknowledging Trump’s stance on tariffs as a response to what he sees as global trade imbalances. Trump had previously imposed a 25% tariff on car imports to the US, including those from the UK, and the UK currently faces a 10% tariff on broader goods. Reeves pointed out that the UK government was actively pursuing a resolution to these tariff issues, with potential reductions in tariffs on US car imports from 10% to 2.5% being discussed as part of a broader trade agreement.

The Chancellor underscored that the UK’s focus is not only on reaching an agreement with the US but also on the broader issue of removing trade barriers with other countries, including Europe and Canada. “I’ve been working closely with European and Canadian counterparts to remove trade barriers,” she explained, reflecting on the ongoing conversations at G20 meetings. Despite the strain in global markets, she emphasised that uncertainty in domestic bond and equity markets negatively affects investment, particularly in the UK economy.

While the US trade deal remains a priority for Reeves, she acknowledged that the UK’s relationship with Europe is arguably more significant in the long run. “Obviously, I’ve been meeting Scott Bessent this week, but I’ve also met this week with the finance ministers of France, Germany, Spain, Poland, Sweden, and Finland,” Reeves said. “It is so important that we rebuild those trading relationships with our nearest neighbours in Europe.”

This shift towards focusing on Europe highlights the UK’s evolving trade strategy under Reeves. The Chancellor pointed out that, while the US is a key partner, Europe is geographically closer and represents a crucial market for British goods and services. Reeves confirmed that the UK is preparing for a summit with the EU in May, with the intention of resetting and strengthening the trade relationship with the European bloc.

Reflecting on the global economic uncertainties, Reeves acknowledged the difficulty of achieving trade breakthroughs amidst fluctuating bond markets and rising investment concerns. “There are strains,” she said, referencing the challenges in securing trade agreements in a volatile economic climate. She noted, however, that even if the UK succeeds in striking a trade deal with the US, the work is far from finished, as many other nations continue to face trade barriers and tariffs.

Despite her focus on the US and Europe, Reeves remains determined to maintain the UK’s position as a global trading power. “It’s not just about the US,” she explained. “We’re going to do this in a way that’s good for British jobs and British consumers.” This statement signals a broader commitment to creating a robust economic environment that benefits both businesses and citizens in the UK.

As talks with both the US and EU progress, Reeves faces the delicate challenge of balancing international trade priorities while ensuring the UK’s economy remains resilient in the face of ongoing global uncertainties. Her efforts reflect a strategic shift towards reinforcing the UK’s economic alliances and securing better trade terms for the nation.