The UK would not hesitate to retaliate against US tariffs if needed, according to Downing Street sources.
The government is in last-minute negotiations with the White House ahead of a 25% tax on car imports and threats of wider tariffs on other goods on 2 April.
It is trying to get an exemption, arguing that – unlike other countries – the UK has a relatively equal trading relationship with the US. The prime minister has said he does not want to jump into a trade war.
US President Donald Trump has introduced a series of tariffs targeting goods from other countries, arguing the measures will help American manufacturers and protect jobs despite warnings prices could go up for consumers.
Charges for businesses in the US importing vehicles will start on 3 April, with taxes on parts set to start in May or later.
Government sources have said the negotiations for a UK exemption would not end after Trump’s deadline on Wednesday, with one saying “we won’t stop trying”.
If tariffs do come into effect, what retaliation from the UK might look like is unclear. There are a range of options from duties on sectors where British products are particularly important to the US, to focusing on specific products like Harley Davidson motorcycles.
One expert told the BBC the “nuclear”, and most unlikely, possibility would be targeting financial services.
But despite UK threats, ministers do not want a trade war.
Prime Minister Sir Keir Starmer said earlier this week the UK would not be “jumping into” one with the US, adding the government was trying to avoid tariffs through “intense negotiations” and would be “pragmatic and clear-eyed” in its response.
The independent Office for Budget Responsibility has warned a reciprocal trade war would wipe billions off economic growth and all but eliminate the surplus the Chancellor has left to stay within her self-imposed fiscal rules.
Dame Meg Hillier, a former Labour minister and chair of the Commons Treasury Select Committee, has warned the government’s commitment to free trade was going to be tested over the next few weeks as a result of Trump’s tariffs.
Trump has said the 25% levy would lead to “tremendous growth” for the industry, promising it would spur jobs and investment in the US.
But there are concerns the move is likely to lead to the temporary shutdown of significant car production in the US, increase prices, and strain relations with allies.
The US imported about eight million cars last year – accounting for about $240bn (£186bn) in trade and roughly half of overall sales – and Mexico was the top supplier of cars to the country, followed by South Korea, Japan, Canada, and Germany.
UK car exports are worth about £7.6bn per year, and the US is the second largest market for UK cars after the European Union, according to car industry body the Society of Motor Manufacturers and Traders (SMMT).
The SMMT said the announcement from Trump was “not surprising but, nevertheless, disappointing”.
World leaders criticised the tariffs shortly after they were announced, with German Economy Minister Robert Habeck saying on Thursday the European Union must “respond firmly” while France’s President Emmanuel Macron called it a “waste of time” and urged Trump to reconsider.
By BBC News
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