The United Kingdom finds itself in an advantageous position to potentially reverse tariffs imposed by the United States, according to officials involved in high-level discussions with the Trump administration. The UK government is actively engaging with U.S. negotiators, believing it has the “best possible position of any country” to secure favorable outcomes in these trade talks.
Chancellor Rachel Reeves and other local leaders prepare for both exciting possibilities. They’re particularly watchful at the prospect that President Donald Trump might come out with new import tariffs. Recent comments by the Trump administration have only added to that confusion. These may very well be inconsistent with the prior assumptions of the UK negotiation team.
Steve Bates, chief executive of the BioIndustry Association was alarmed by upcoming tariffs. He noted that the UK’s pharmaceuticals sector, which exported £6.6 billion worth of medicines and related products to the U.S. in 2024, could be significantly impacted. Bates underscored this point by saying that half of the world’s pharmaceutical market is in the United States. He further mentioned that pharmaceutical exports from the UK are about the same size as the car industry, plus or minus.
In anticipation of potential tariffs, the UK government is planning its own response. One push to do so involves hiking taxes on Big Tech companies. This is intended to produce a more conducive climate for negotiations. Reeves proposed repealing the new digital services tax. This tax was levied at 2% on big tech firms such as Amazon and brought in £800 million annually. It might go a long way to ensuring a better trade agreement.
There’s more to the proposed deal than lowering tariffs. It truly dives into the other broader issues such as exchange of technology, trade in goods and services, and agricultural products. This multi-faceted approach is indicative of the UK’s desire to further economic relations with the U.S.
Whatever the outcome, Chancellor Reeves has made it clear that everything is still to play for as negotiations proceed. Once the deal is nearly done, a senior administration official in the negotiations said, “We are very close to having an agreement. We don’t have any sense of when the president would sign it or what his next steps would be.”
The Scotch whisky industry is similarly preparing for impending tariffs, having previously been in Trump’s crosshairs during his last term. It has kept the U.S. as the biggest market of Scotch exports, which accounted for £971 million last year. Annabelle Thomas, chief executive of Nc’nean Distillery, shared her worries. She thinks big tariffs would dramatically limit investment prospects in the U.S. market. She said, “If they’re lower than maybe some were hoping for, maybe we can absorb them in that short-term.”
Despite these continued struggles, the UK government’s trade secretary insists that Britain is still in a strong position to eventually win the fight against U.S. tariffs. As our independent watchdog, the Office for Budget Responsibility (OBR), recently warned, he argues that new tariffs would hurt their own economic growth so badly as to cause overall growth to fall by 1% in the worst-case scenario. Such a prospect would obviously threaten Reeves’s plans for fiscal austerity on spending and borrowing.
Those negotiations between the two countries have been described as “constructive” by a spokesperson for the Prime Minister’s office. They stopped short of ruling out retaliatory action if tariffs are introduced on exports from the UK.
“I do believe not only can we get to a place where we are avoiding tariffs on each other, but we’re also strengthening that relationship.” – Jonathan Reynolds
“And I believe that the framework of an agreement is certainly in place,” – Jonathan Reynolds