Rachel Reeves warns Trump’s trade war will hit UK economy hard, even if Britain avoids direct tariffs

Rachel Reeves has issued a stark warning about the impact of Donald Trump’s escalating trade war, stating that Britain’s economy will suffer even if it is spared direct tariffs. Addressing leading UK manufacturers at the MakeUK National Manufacturing Conference, the Chancellor made it clear that global trade tensions would slow GDP growth, drive up inflation, and harm businesses.

The warning comes as Trump pushes ahead with aggressive new tariffs, imposing a flat 25% duty on goods from Mexico and Canada while hiking levies on Chinese imports from 10% to 20%. The UK has been scrambling to secure a trade deal to avoid a similar fate, but Reeves stressed that even a best-case scenario won’t insulate Britain from wider economic turbulence.

Keir Starmer recently travelled to Washington, meeting with Trump in an effort to negotiate a deal that could protect British exports. Trump suggested that an agreement was possible, stating that both sides “could very well end up with a real trade deal where the tariffs wouldn’t be necessary.” Despite this, Reeves admitted that the UK’s manufacturing sector remains vulnerable, with new US duties on British steel and aluminium set to take effect next week. Reciprocal tariffs on American goods are expected to follow in April.

As part of the UK’s efforts to maintain strong ties with the US, Starmer pledged to increase defence spending to 2.5% of GDP by 2027, a move seen as an attempt to win favour with Trump. Reeves emphasised that any rise in military expenditure must directly benefit British businesses and jobs. She also announced plans to streamline defence procurement processes, including a review of single-source contract rules to speed up government spending in the sector.

While the UK government remains hopeful about securing a trade agreement, Trump’s protectionist policies have already sent shockwaves through global markets. Reeves’ comments highlight the harsh reality that, even if Britain avoids direct tariffs, slower international trade and rising costs will still take a toll on the economy.

For UK manufacturers, the uncertainty is deeply concerning. With new tariffs looming and economic instability growing, businesses are preparing for challenging months ahead. Whether Starmer’s diplomatic efforts will shield the UK from the worst effects of Trump’s trade war remains to be seen, but Reeves’ warning suggests that Britain is far from safe.

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Chancellor Rachel Reeves has warned that Donald Trump’s escalating trade war, imposing tariffs on China, Canada, and Mexico, could harm the UK economy even if Britain is not directly targeted. Speaking at a Make UK event, Reeves stressed that global trade disruptions would raise inflation and slow UK growth. Treasury estimates suggest the UK could lose up to £24 billion in GDP over two years due to supply chain issues and rising costs.

Reeves called for closer cooperation with US officials to mitigate the impact and urged businesses to prepare for potential volatility. She also criticised Trump’s economic isolationism, arguing it threatens global stability and could increase costs for UK consumers and manufacturers. While Trump has not imposed direct tariffs on Britain, Reeves emphasised that a global slowdown would still affect UK exports and investment. She reaffirmed Labour’s commitment to free trade and maintaining strong economic ties with the US.