Starmer admits UK will face Trump tariffs this week as US president sparks global recession fears: Live

The Independent’s political correspondent Archie Mitchell writes:

Since September, Sir Keir Starmer has had one mission above all else on the world stage: to keep Donald Trump onside.

The prime minister knows Washington is key to bringing about a sustainable end to the war in Ukraine, but under Mr Trump, the US is also key for his mission to get the economy back on track.

And with Mr Trump threatening tariffs left, right and centre, Sir Keir bent over backwards to try to curry favour with the commander in chief.

The PM hand-delivered Mr Trump an invitation from the King for an unprecedented second state visit, while refusing to condemn almost anything Mr Trump and his outriders Elon Musk and JD Vance said against the UK and Europe on the world stage.

But, with Mr Trump’s “liberation day” looming, Downing Street has admitted Sir Keir’s efforts have failed, and tariffs will rock our already ailing economy.

Government sources stressed on Monday that talks to secure a carve-out for Britain will not conclude before the raft of trade taxes are rolled out this week, while the prime minister’s official spokesman said you would “expect the UK to be impacted by” the levies.

Days after a spring statement which saw Rachel Reeves barely rebuild the government’s fiscal headroom, with the official spending watchdog warning a trade war could blow it to smithereens, Sir Keir looks once again to be facing a crisis.

Tariffs are taxes paid by US companies on imported goods.

They are seen by Donald Trump as a way to bolster production by American firms, protecting home-grown manufacturers, while also punishing foreign countries for unfair trade practices.

The Independent’s business and money editor Karl Matchett writes:

While the FTSE 100 continues to trend downwards for the day – now 1.4 per cent down approaching 1pm – it’s also worthwhile looking over the other side of the Atlantic, ahead of the market opening on the Nasdaq and New York Stock Exchange.

Futures show heavy selling in pre-trading, with the likes of Nvidia set to open 4.2 per cent lower and Tesla more than 6.0 per cent down – and that after another heavy fall over 3.5 per cent for the carmaker on Friday last week.

Trump’s tariffs and the wider global economic uncertainty they have caused means the US stock markets will be sharply in focus over the next couple of days as the American president details exactly who faces the next bout of cost add-ons, and on what.

Europe is expected to fare worse than the US, Goldman warned, as it projected the region’s economy could enter into a “technical” recession this year.

The brokerage forecasts “little” growth for the rest of 2025, with non-annualised growth of 0.1 per cent, 0.0 per cent and 0.2 per cent in the second, third and fourth quarter, respectively.

The brokerage expects Trump to implement a reciprocal tariff on the European Union amounting to 15 percentage points, raising the total effective tariff rate by 20 percentage points.

“We estimate that our new tariff assumptions will lower euro area real GDP by an additional 0.25 per cent compared to our previous baseline, for a total hit to the level of GDP of 0.7 per cent compared to a no-tariff counterfactual by end-2026,” Goldman said in a separate note on Sunday. However, in a more “downside” scenario of tariffs, Goldman sees a total hit of 1.2 per cent to the economy, which could push the euro area into a technical recession in 2025, compared with a no-tariff scenario. The brokerage said it now expects the ECB to deliver an additional cut in July, along with its previous forecast of a rate cut each in April and June.

Goldman Sachs raised the probability of a US recession to 35 per cent from 20 per cent and said it expects more rate cuts by the Federal Reserve, as President Donald Trump’s tariffs roil the global economy and upend financial markets.

The brokerage also lowered the world’s largest economy’s GDP growth forecast for 2025 to 1.5 per cent from 2.0 per cent and projected three interest rate cuts each from the US Fed and the European Central Bank from its previous expectation of two each.

Trump said on Sunday his reciprocal tariffs, to be announced this week, would include all countries and not a more limited number, rattling financial markets globally over fears of an economic slowdown.

In a separate note, Goldman also cut its year-end target for the S&P 500 index for a second time this month to 5,700 from 6,200, the lowest among Wall Street brokerages, followed by Barclays’s target at 5,900.

Downing Street is expecting the UK to be hit by Donald Trump’s tariffs this week, as discussions with the US are set to continue beyond Wednesday.

The Prime Minister’s official spokesman said on Monday: “When it comes to tariffs the Prime Minister has been clear he will always act in the national interest and we’ve been actively preparing for all eventualities ahead of the expected announcements from President Trump this week, which we would expect the UK to be impacted by alongside other countries.

“Our trade teams are continuing to have constructive discussions to agree a UK-US economic prosperity deal. But we will only do a deal which reflects this Government’s mandate to deliver economic stability for the British people, and we will only act in the national interest.”

Asked whether the Government had given up hope of a deal being signed before Wednesday, the spokesman said he is “not going to put a time frame on those discussions” but that they are “likely to continue beyond Wednesday”.

He said that the UK will “take a calm and pragmatic approach in our response”.

The Independent’s political editor David Maddox writes:

Another leading trade expert has warned that it will be hard to unwind Donald Trump’s tariffs once they are unleashed.

Chris Southworth, secretary general of the International Chamber of Commerce United Kingdom (ICC United Kingdom), has also warned of dire consequences for the UK car industry which sells 17 per cent of its products to the US.

He said: “There is no avoiding the impact of tariffs given the integrated nature of the UK and US economies. UK auto companies selling cars to the US will feel an immediate impact but more importantly, the scale of tariffs has the potential to wipe out the £9bn headroom the government announced in the Spring Statement.

“Nobody wins from a tariff war. These measures will impact firstly the poorest of American consumers, increasing prices as the increased costs will ultimately be passed on to consumers.

“But if we take a step back from the US consumer and look at where the goods come from this will impact exporters around the world who sell into the US. Around 17% of all cars manufactured in the UK last year went to the US.

“Businesses need certainty to operate, to plan, to invest. If demand for these slow it will certainly impact production, which will then impact jobs and have a ripple effect through the supply chain.

“It’s very difficult if not impossible to mitigate the impact of tariffs once they come into force especially if every country retaliates. Unwinding the tariffs once in place will require a tremendous amount of diplomatic effort all of which diverts resources away from where they should be on working together to solve the issues we all face as a global community.”

Donald Trump’s threatened global tariffs have led to many uncertainties with the only certainty, according to experts, being that “everyone loses”.

Economic research company Capital Economics warns: “Tariff wars have no real winners – only mounting costs and unintended consequences.”

It also suggested the tariffs are likely to remain in place for a while, with countries like China set to face more aggressive increases.

The economists write: “To this end, they would represent both a shift in US revenue mix but also represent a new front in global fracturing.”

The pound has risen against the dollar to be on track for its best month in over a year as the US faces the prospect of a recession after Donald Trump announced international tariffs, according to financiers.

Sterling was said to be headed for an increase of nearly 3 per cent against the dollar this month, taking it to its best month since November 2023.

Michalis Rousakis and Claudio Piron, from Merrill Lynch, told The Telegraph: “Across-the-board tariffs would be a negative surprise, in our view.

“Our main concern is ‘something breaking’ from aggressive tariffs, triggering a tail risk of a sharp market sell-off, pushing the dollar much higher in the short term.”

The Kremlin, asked about Donald Trump’s sanctions threat, has said that Russia is working with the US on Ukraine settlement ideas.

The Kremlin said on Monday that Russia and the US were working on unspecified ideas on a possible peace settlement in Ukraine after US President Donald Trump said he was “pissed off” at Russian President Vladimir Putin.

Trump told NBC News he was very angry after Putin last week criticised the credibility of Ukrainian President Volodymyr Zelenskiy’s leadership, the television network reported, citing a telephone interview early on Sunday.

Trump said he would impose secondary tariffs of 25 per cent to 50 per cent on buyers of Russian oil if he felt Moscow was blocking his efforts to end the war in Ukraine.

Asked about Trump’s comments, Kremlin spokesman Dmitry Peskov said Putin remained open to contacts with Trump and that a call between them could be set up at short notice if necessary though no call was scheduled for this week.

Peskov said Moscow and Washington were continuing to work on building up bilateral ties.