Sir Keir Starmer and Donald Trump have agreed that “productive negotiations” on a potential UK-US economic deal will “continue at pace,” according to Downing Street. The Sunday night phone call between the two leaders comes just days before a critical deadline on US tariffs, with British officials pushing for a last-minute exemption from Trump’s planned 25% levy on car imports, set to take effect Wednesday.
The US president has imposed a series of tariffs targeting goods from multiple countries since beginning his second term, with threats of further trade restrictions. While Starmer has stated he does not want a trade war with the US, he has also emphasized that the UK “reserves the right” to impose reciprocal tariffs if no exemption agreement is reached.
The UK government has argued that its trade relationship with the US is more balanced compared to other partners, making broad tariffs unjustified. However, the independent Office for Budget Responsibility (OBR) has warned that a retaliatory trade war could cost billions in economic growth and severely limit Chancellor Rachel Reeves’ fiscal flexibility.
Under the OBR’s most “severe” scenario where the UK and other nations retaliate against Trump’s tariffs GDP could be 0.6% lower than forecast this year and 1% lower in 2025. This would nearly wipe out Reeves’ £9.9 billion fiscal headroom, potentially forcing tax hikes or spending cuts to stay within self-imposed budget rules. If the UK chooses not to retaliate, the economic impact would be smaller but still significant, with GDP projected to be 0.4% lower this year and 0.6% lower next year.
British negotiators are racing to secure an exemption before the Wednesday deadline, with UK car exports to the US valued at £7.6 billion annually. The US is the second-largest market for British cars after the EU, and Trump’s tariffs would particularly hit luxury manufacturers like Rolls-Royce and Aston Martin.
Should tariffs take effect, the UK has several retaliatory options, including targeting key US exports like Harley-Davidson motorcycles or sectors where British products hold significant importance for American consumers.
For more political updates, visit London Pulse News.
