Ministers should focus on rebuilding bridges with the EU, Labour politicians have said, after a senior adviser to Donald Trump downplayed the prospect of a breakthrough with the US.
MPs said the government should “prioritise our trading relationship with the EU” and “get a sugar rush of growth” instead of banking on the prospect of preferential treatment from Washington.
Trump imposed 10% tariffs on all UK exports this month, with several other markets, including the EU, facing steeper rates. After financial markets plummeted, the US president announced a temporary reprieve on Wednesday, reducing tariffs on almost all other countries to his baseline of 10%. Car, steel and aluminium imports continue to face a higher tariff of 25%.
The government is in advanced negotiations with the US over a trade deal to secure more favourable arrangements for the UK. However, Kevin Hassett, an economic adviser to Trump, told CNBC on Thursday that any deal that would persuade the president to go below 10% would need to be “extraordinary”.
Asked if she was losing confidence in the prospect of a US trade deal, Rachel Reeves told reporters on Friday: “We continue to engage with our counterparts in the United States.”
She added: “At the same time, we also want to improve trading relations with other countries around the world. It’s why I hosted the Indian finance minister in London this week as part of our economic and financial dialogue, and to try and secure a free trade and investment treaty with India. It’s also why we are having a summit with the European Union in May to improve our trading relations.”
The Guardian reported this week that the government had told businesses a free trade deal with India was 90% complete. Ministers are also putting stock in building economic ties with China, with the trade minister Douglas Alexander travelling to Beijing this week for talks.
Liam Byrne, the Labour chair of the Commons business and trade committee, called for a “big, ambitious reset” with the EU and said it would “deliver an economic uplift bigger than the hit we are going to take from tariffs”.
He said: “We need to prioritise our trading relationship with the EU because it is big and close … There is a real frustration in Brussels about the UK not being clearer in what it wants in the reset. This is in the EU’s interest, the UK’s interest, and the urgency of the situation demands that we crack on with this.”
Stella Creasy, a Labour MP and chair of the Labour Movement for Europe, said: “Get the deal with Europe. Stop talking about red lines. We have shown we can work with Europe on defence security and our economies are intertwined … we do five times as much trade with Europe as with America.
“At the moment, we have tariff-free trade with Europe but we have a massive drop in trade because of all the paperwork. There are many ways we could negotiate to remove those barriers and get a sugar rush of growth from improving trading with our neighbours.”
Harriet Harman, the former cabinet minister and Labour peer, said ministers needed to address “the elephant in the room, which is that Trump is wrong on this, we don’t agree with him”.
Speaking to Sky News’ Electoral Dysfunction podcast, Harman said that when the US put tariffs on imported steel in 2002, Tony Blair “did say this is unacceptable, this is wrong, it’s unjustified, it is breaching the World Trade Organization rules”.
“He was able to say we do not believe this is how you should be within the world organisation and Bush has got it wrong,” she added. “I think it feels as if there’s a kind of restricted vocabulary amongst ministers at the moment where they are speaking in code.
“I think the story needs to be told to the country that this is a really difficult problem and Trump has caused it and he is wrong to do this, but we will be OK with this government,” Harman said.
Hassett told CNBC this week: “Everybody expects that the 10% baseline tariff is going to be the baseline. It is going to take some kind of extraordinary deal for the president to go below there.”
Starmer admitted on Thursday that he had not spoken to Trump since the tariffs were introduced.
