Meanwhile, the United Kingdom is still grappling with damage from recently imposed new tariffs by the United States. This seemingly innocuous decision is having a seismic impact on global trade patterns. Instead, the US government is just beginning a misguided trade war. At the same time, new UK PM Sir Keir Starmer’s is at Chequers, his country residence, dealing with the backlash, and furiously negotiating compensation with world leaders.
Recent developments have raised questions about the UK’s ability to scrap the 10% tariff on its exports to the US. In an interview with the BBC, Starmer was asked a question. He was then pressed on whether the UK government would consider dropping this tariff in light of the escalating trade tensions. His response suggested an openness to the idea of flexibility to better help UK businesses face these uncertainties.
The US has quickly and publicly renounced the globalization process it once led. With this unprecedented shift, world leaders have been heavily challenged to respond in a timely manner. During a similar trade spat two years ago, President Donald Trump told Americans to “hang tough” and cease using tariffs as a blunt instrument to punish their trading partners. In his defense, on the one hand, he’s suggested that those new tariffs would return manufacturing to US soil and fatten tax revenues.
To the extent that Starmer has been able to respond to these advances, he has done so by entering into talks with French President Emmanuel Macron. photo by Gage Skidmore on Flickr They both specifically said that “nothing should be off the table” in responding to the US tariffs. The situation has escalated to a point where the UK government must “manage rapid support and protection very robustly,” according to Peter Atmore, a prominent industry leader.
Starmer has made it clear that he is prepared to use industrial policy to “shelter British business from the storm.” He stated that some may feel uncomfortable with state intervention in market shaping, but he believes it is necessary given the rapid changes in the global landscape.
The effects of the US tariffs are being heard throughout multiple industries. The US has imposed a 25% tariff on all car imports from the UK, including luxury car maker Jaguar Land Rover (JLR). In retaliation to the newly enacted tariff, JLR made the decision to stop sending shipments to the US. This step underscores the urgent impact of the deepening trade war.
“This is an unprecedented situation for British manufacturers,” said Darren Jones, expressing disappointment over the tariffs. The UK has a lot at stake in the automotive industry, particularly luxury brands such as JLR. If these tariffs are allowed to remain, our economy is destined for catastrophic consequences.
The EU is struggling with its own rising customs tariffs, making international trade relations even more difficult. Turkish firms compete successfully in Europe and many analysts think that the US tariffs would give them openings for entry into the US market. If enacted, this major policy change would tilt the competitive landscape dramatically.
As he proclaims, “the world as we knew it has gone,” Starmer’s warnings ring alarmingly true. Above all, he calls on the UK not to ‘cave in’. He thinks this will soon get them to a zero-tariff environment, which should dramatically improve their trade relationship with the US.
It’s not just the British automotive sector being hurt by the imposition of US tariffs. Israeli exports are badly hurt, now facing a 17% tariff despite the fact that Israel recently agreed to remove tariffs on US imports. This administration’s decision highlights the capriciousness of today’s trade policymaking and its long-lasting impact.
Fellow billionaire Elon Musk has been increasingly sympathetic to the latter position. To do this he encourages movement into a zero-tariff situation, toward what would be an effective free-trade zone between Europe and North America. He noted, “I hope it is agreed that both Europe and the United States should move ideally, in my view, to a zero-tariff situation.”
As discussions unfold and global leaders respond to this new reality, one thing remains clear: the economic landscape is shifting rapidly. The UK government certainly has to tread these challenging waters prudently, but needs to stand firmly behind its manufacturers and look for new opportunities in the global marketplace.