Donald Trump is unleashing a massive escalation in his trade war, with the UK not spared punitive tariffs set to take immediate effect.
The president is announcing his programme at a White House event entitled ‘Make America Wealthy Again’.
“This is liberation day”, he told a cheering audience of supporters while hitting out at foreign “cheaters”.
He claimed “trillions” of dollars from the “reciprocal” levies he was imposing on others’ trade barriers would provide relief for the US taxpayer and restore US jobs and factories.
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His first tariff announcement was a 25% duty on all car imports from midnight – 5am on Thursday, UK time.
He then took out a board containing a list of countries, or trading blocs, and the “reciprocal” duties they would face.
Mr Trump confirmed the European Union would face a 20% reciprocal tariff on all other imports.
The UK’s rate was set at 10% – a shot across the bows for the country’s 20% VAT rate.
The ramping up of duties promises to be painful for the global economy. Tariffs on steel and aluminium are already in effect.
The UK government was yet to give its reaction but it is not expected to retaliate through counter tariffs like the EU has pledged to do.
Should that scenario play out Northern Ireland – part of the UK, of course – faces difficulty because all imports there are tied to EU rules under post Brexit trading arrangements, meaning US goods shipped to Northern Ireland would be subject to the EU’s reprisals.
The prime minister has rejected the notion of a “knee-jerk” response from the UK, especially as he believes that “rapid progress” has been made in continuing UK-US trade talks.
The impact of a trade war would be expected to be widely negative, with tit-for-tat tariffs risking job losses, a ramping up of prices and cooling of global trade.
Research for the Institute for Public Policy Research has suggested that more than 25,000 direct jobs in the UK car manufacturing industry alone could be at risk from the tariffs on car exports to the US.
Each dent poses a big risk to growth and the so-called headroom the chancellor Rachel Reeves was forced to restore to the public finances at the spring statement, risking further spending cuts or tax rises ahead to meet her fiscal rules.
A member of the Office for Budget Responsibility, David Miles, told MPs on Tuesday that US tariffs at 20% or 25% maintained on the UK for five years would “knock out all the headroom the government currently has”.
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But he added that a “very limited tariff war” that the UK stays out of could be “mildly positive”.
He said: “There’s a bit of trade that will get diverted to the UK, and some of the exports from China, for example, that would have gone to the US, they’ll be looking for a home for them in the rest of the world.
“And stuff would be available in the UK a bit cheaper than otherwise would have been. So there is one, not central scenario at all, which is very, very mildly potentially positive to the UK. All the other ones which involve the UK facing tariffs are negative, and they’re negative to very different extents.”
