Reeves: Tariff-free deal with US still possible and Trump can ‘absolutely' be trusted

ITV News

23-04-2025

Rachel Reeves told ITV News Business and Economics Editor Joel Hills she understood some of the US' concerns and said a trade war is in "no one's interest"
The European Union and Canada are not taking tariffs lying down.
Both have responded to the trade war that US President Trump initiated by announcing tariffs on imports from the US.
The UK strategy has been quieter, more cooperative and peaceable.
The 'softly, softly' approach hasn't yet secured the UK better treatment from the Trump administration, but the chancellor seems to believe it is working.
'It's clear the United States do want to secure an economic agreement with the United Kingdom and we want to do likewise,' Rachel Reeves has told ITV News in an interview in Washington, although she wouldn't say how soon a deal could be reached.
Trump has set a baseline tax of 10% on imports from all countries, but the chancellor seems to believe that the US can be persuaded to lift all the tariffs that have been imposed on the UK since February.
'Discussions are ongoing, they're going well,' Reeves insisted.
The chancellor is scheduled to meet the US Treasury Secretary Scott Bessant while she is in Washington for the International Monetary Fund's (IMF) spring meeting.
On Wednesday, and not for the first time, Bessant was sounding more amenable and conciliatory than the president.
'America First does not mean America Alone,' he said in a speech at the Institute of International Finance.
'To the contrary, it is a call for deeper collaboration and mutual respect among trade partners."
If the government cannot secure a UK carve-out on tariffs, will it retaliate with tariffs of its own?
It's not obvious how the UK could do this without pushing up prices for consumers, and the situation is further complicated by the fact that we are currently dependent on the US for military equipment and share intelligence.
Speaking to the chancellor, you get the sense that retaliation is plan Z. It's not even a veiled threat.
'I don't think escalation is the right approach. We want to bring down trade barriers, not increase them. A trade war is in no one's interest,' Reeves said.
Trade discussions roll on, but there is a sense of urgency. President Trump's tariffs and the blizzard of uncertainty he has whipped up have weakened our growth prospects, pushing up the cost of borrowing and increasing the strain on the government's finances.
Annual borrowing in the year to the end of March came in £15 billion higher than the government's forecaster, the Office for Budget Responsibility, forecasted just a month ago.
Meanwhile, activity by companies in the private sector fell at its fastest pace for more than two years in April, according to a business survey by stock market index S&P.
Unless something changes, there is a risk the chancellor will be forced to increase taxes or cut spending again, later in the year.
'The fiscal rules [on debt and borrowing] are non-negotiable,' insisted Rachel Reeves on Wednesday morning.
And she insists the tax pledges Labour made in its election manifesto - not to raise income tax, VAT or national insurance for working people - are sacrosanct too, whatever happens next.
'I understand the anxiety that many families still feel about the cost of living. And as a government, we will do nothing to exacerbate those concerns,' she told ITV News.
This commitment also limits the UK's ability to retaliate with tariffs of its own. It's hard to see how taxes can be imposed on US imports in any meaningful way without raising prices for UK households.
Even if the UK does secure an agreement with President Trump, is it confident he'll stick to it?
After all, Canada had a trade deal with the United States, one that Trump agreed to and signed in his first term as president, and look what happened there.
President Trump can 'absolutely' be trusted not to renege on a trade deal, the chancellor insisted.
She added: 'There's a good relationship between the President of the United States, Donald Trump and our Prime Minister, Keir Starmer.
"We saw that when the prime minister visited the White House recently, and also in the continued dialogue between our two leaders.'
There is an increasing sense that Trump's attempt to rewrite the global trade rules - and the aggressive way in which he going about it - is starting to bump up against constraints.
Trump slaps a 145% tariff on imports from China and then concedes they are unsustainable.
He threatens to sack the chair of the Federal Reserve, the central bank of the United States, for not cutting interest rates and then, days later, insists his job is safe.
A trend is emerging: when investors sell the dollar, when they sell US government debt and shares in US companies, the president always backs down.
Trump is powerful, but the markets hold sway.