President Trump’s sweeping tariffs wiped trillions from global stock markets as Sir Keir Starmer was urged by business leaders not to retaliate.
US stocks plunged along with the value of the dollar, prompting fears of a possible recession after a return to tariff levels not seen since the 1930s. There were smaller falls in UK and European stock markets.
Late on Thursday night Trump insisted that Starmer was “very happy” about Britain’s tariff treatment. “We have a very good dialogue. I think he was very happy about how we treated them with tariffs,” the president told reporters on Air Force One, referring to the “reciprocal” 10 per cent levy he imposed on the UK in a speech on Wednesday.
Workers on the floor of the New York Stock Exchange assess the fallout
SETH WENIG/AP
Trump said the US would ultimately be stronger after a global trade war. “The operation is over,” he said. “The patient lived, and is healing. The prognosis is that the patient will be far stronger, bigger, better and more resilient than ever before.”
The comments came on a day of turmoil in global stock markets. Almost $2.5 trillion was wiped off the S&P 500 index by the close of trading in New York.
US tech and consumer companies were among the hardest hit. Apple lost more than $300 billion in value, Nike shares were down by 13 per cent and Dell Technologies by 19 per cent.
The FTSE 100, the UK’s premier share index, was down by 1.6 per cent, its worst day of trading since August 5 last year, and the FTSE 250 lost 2.2 per cent. Similar effects were felt across Europe and Asia.
President Macron of France called Trump’s actions “brutal and unfounded” and suggested European companies should rethink investments in the US. The EU said it was “preparing for further countermeasures”, while Mark Carney, the Canadian prime minister, said he would respond with a tax on US vehicles.
Sir Keir Starmer said the country faced a “new era”
JONATHAN BRADY/PA
Starmer has adopted a more measured approach and said: “I don’t think we should jump straight into a trade war.” Acknowledging that the tariffs would be damaging, he said: “This is not just a short-term tactical exercise. It is the beginning of a new era. And that’s why I’ve instructed my team to go further and faster on what we need to do to put more resilience and more strength into our economy.”
Economists downgraded Britain’s growth forecasts and said the tariffs made tax rises more likely. The National Institute of Economic and Social Research said Britain faced the prospect of zero growth next year and a “huge risk” of a recession.
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The government is optimistic that the UK will be able to secure an economic deal with the US that will lift the tariffs. However, officials said it could take more than a month and that there were no guarantees given the “uncertainty” surrounding Trump’s administration.
The government said it would consult businesses on “possible retaliatory action” after Trump hit the UK with tariffs of 10 per cent. It published a list of more than 8,000 products that could be subject to retaliatory tariffs.
Business leaders said that responding with further tariffs would escalate the situation and add to the uncertainty. They warned of price rises and potential shortages of goods.
The government is also preparing to impose import quotas to stop the UK from being flooded with cheap foreign goods from countries that have been shut out of US markets.
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Ministers will also make a series of domestic announcements to strengthen the economy. The prime minister will bring forward plans to publish his industrial strategy to support businesses. He will water down rules requiring carmakers to sell electric vehicles. The aim is to protect the automotive industry, which is facing tariffs of 25 per cent. Plans to ban hybrid vehicle sales from 2030 will be dropped and carmakers will be given more flexibility on meeting annual electric vehicle sales targets.
While ministers began preparations for retaliatory tariffs and said they “reserve the right” to hit back against the US, the government is pinning its hopes on being able to reach an economic deal with Trump. Jonathan Reynolds, the business secretary, said he was “optimistic” about his chances of striking an agreement that would include the removal of tariffs and other trade barriers.
Jonathan Reynolds reacts to Trump’s tariffs
He told MPs: “It remains our belief that the best route to economic stability for working people is a negotiated deal with the US.
“I believe we could seriously get to a position where we’re not only avoiding the imposition of additional trade tariffs and barriers, we could be deepening our trade relationship and removing some of the barriers that already exist, particularly in trade in services.”
Rain Newton-Smith, director-general of the CBI, said that there would be no winners in a trade war. She said retaliation would “only add to supply chain disruption, slow down investment and stoke volatility”.
Stephen Phipson, chief executive of the manufacturers’ body Make UK, said: “Once people start retaliating this is going to turn into a terrible trade war. What they should be doing is trying to find a way to negotiate through it, because all that’s going to do is create absolute chaos everywhere.”
