Rachel Reeves yesterday warned that Britain will not escape the pain of Donald Trump‘s trade wars as global markets tumbled.
It came as Mr Trump’s swingeing new tariffs on imports from Mexico, Canada and China took effect – and all three countries said they would retaliate.
Canadian PM Justin Trudeau called the US president’s move ‘a very dumb thing to do’ – prompting the US President to threaten another tit-for-tat tariff hike.
And the Chancellor cautioned that even if, as hoped, Britain is not directly caught up in the fight, it would still be hit.
‘It’s absolutely the case that even if tariffs aren’t applied to the UK, we will be affected by slowing global trade, by a slower GDP growth and by higher inflation than otherwise would be the case,’ Ms Reeves said.
The comments came as fears deepened about Mr Trump’s increasingly combative stance as he seeks to upend relations with America’s biggest trading partners, which he sees as unfair.
Experts fear his actions will not just hit those countries but reverberate around the world and also damage the US, creating what some have dubbed a ‘Trumpcession’.
Wall Street stock indices sold off, wiping out the gains seen by US shares since Mr Trump’s election victory in November.
Chancellor of the Exchequer Rachel Reeves arriving at the Make UK Conference at the QEII Centre in London. Picture date: Tuesday March 4
Prime Minister Justin Trudeau holds a news conference on imposed U.S. tariffs as Foreign Affairs Minister Melanie Joly, Finance Minister Dominic LeBlanc and Public Safety Minister David McGuinty look on in Ottawa on Tuesday
But US Treasury Secretary Scott Bessent shrugged off the market turmoil, saying the White House was focused on ‘Main Street’ – meaning ordinary US consumers – rather than Wall Street.
‘Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers,’ Mr Bessent told Fox News’s Fox & Friends.
‘So we are going to rebalance the economy.’
Yesterday, the US President’s new 25 per cent tariffs on neighbours Mexico and Canada – which he had previously suspended – took effect.
Mr Trump also doubled tariffs on China from 10 per cent to 20 per cent.
Beijing responded with duties of 15 per cent on some US exports and restrictions on some US companies. Mexico’s president Claudia Sheinbaum said she would announce retaliatory tariffs this weekend. And Mr Trudeau said Canada would put tariffs on as much as £84bn worth of US imports.
‘Today the United States launched a trade war against Canada, their closest partner and ally, their closest friend,’ he said.
‘At the same, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense.’
The US President’s new 25 per cent tariffs on neighbours Mexico and Canada – which he had previously suspended – took effect. Mr Trump also doubled tariffs on China from 10 per cent to 20 per cent
In New York, the S&P 500, Dow Jones and Nasdaq indices all saw sharp falls. Analysts fear that levies on foreign imports are likely to increase US inflation and cut into corporate profits.
Among the market losers yesterday were Tesla, the electric car company led by billionaire Elon Musk – who is now also one of Mr Trump’s closest advisers.
Stephen Innes, managing partner at SPI Asset Management, said the US could ‘stumble into a self-inflicted Trumpcession’.
And the bosses of major US store chains Target and Best Buy warned of higher prices.
‘The consumer will likely see price increases over the next couple of days,’ said Target boss Brian Cornell. ‘If there’s a 25 per cent tariff, those prices will go up.’
Ms Reeves told a conference hosted by manufacturing trade body Make UK there was ‘every reason to be hopeful about coming to some sort of a trade deal’.
But she added: ‘I’m not naive. This is not going to be an easy thing to secure for reasons that we all understand. There will have to be give and take on both sides.
‘We absolutely recognise that, but I do think there’s a big opportunity here.’
Danni Hewson, head of financial analysis at trading platform AJ Bell, said: ‘Donald Trump always said that he found the word ‘tariff’ to be the most beautiful word in the dictionary.
‘He promised that a Trump presidency would put tariffs at the heart of its economic strategy, but he still managed to leave investors with a big enough question mark for a significant post-election market bounce.
‘Today that bounce is gone, with Wall Street looking deflated and investors globally feeling more than a little shell-shocked.’
