There’s a lot on chancellor Rachel Reeves’ agenda this week, as she meets with finance ministers and business leaders at the International Monetary Fund’s (IMF) Spring Meeting.
This includes creating contingency plans for dealing with the worst potential outcomes from the war in Iran and navigating increasingly tense relations with the US, which could result in higher tariffs being imposed on both sides of the Atlantic.
We bring you the key updates for trade below.
Trump threatens UK trade deal
Rising UK-US tensions over the war in Iran could impact cross-Atlantic trade, if US President Donald Trump’s latest threats are to be believed.
Trump yesterday (15 April) said the UK-US Economic Prosperity Deal, which was signed last year to reduce the ‘reciprocal tariffs’ he applied to UK imports months earlier, could “always be changed”.
Talking about the relationship to Sky News, Trump said:
“Well, it’s been better, but it’s sad. And we gave them a good trade deal, better than I had to, which can always be changed.
“It’s the relationship where when we asked them for help, they were not there when we needed them, they were not there when we didn’t need them. They were not there, and they still aren’t there.”
Trump has accused allies, including the UK, of not being supportive enough of the US-Israel military campaign in Iran.
British prime minister Sir Keir Starmer has only allowed the US to use UK military bases in the region for ‘defensive’ procedures and has said he is “fed up” with Trump’s actions, blaming them for causing UK energy bill increases. Chancellor Reeves yesterday called the war a “mistake”.
A UK trade bazooka?
Amid these threats, the UK government is said to be readying new powers to enable it to protect the economy from “adverse economic pressure”. The government published a call for evidence on the “potential powers” last week (9 April).
Trade minister Sir Chris Bryant told Politico that the call for evidence seeks to assess whether the UK “needs additional, last-resort tools to defend against acts of adverse economic pressure if diplomacy alone isn’t enough”.
“Strengthening our economic resilience, and by working closely with our international partners, we can help keep the UK open, secure and standing up for free and fair trade.”
These powers would appear to resemble the EU’s Anti-Coercion Instrument (ACI), more colloquially referred to as its ‘trade bazooka’. The instrument, if implemented, would restrict imports and exports of goods and services, as well as investment. The EU has not yet used the ‘bazooka’ but has threatened to do so in trade spats with China and the US.
Crawford Falconer, the UK’s former chief trade negotiator, told Politico that the UK developing its own instrument would be a first step towards “trying to have a slightly more macho posture” in an increasingly fraught global environment, and could “reassure people that we’re not going to overlook anything”.
However, he warned that the use of it would “end up doing more harm”. The Chartered Institute of Export & International Trade’s director general, Marco Forgione, agreed, saying:
“It’s probably better to have it, but will you feasibly or practically ever use this?
“Deploying a trade retaliatory regime is a zero-sum game because that then itself encourages or incentivises further action, so you find yourself in a circle of escalation.”
Reeves grappling with Iran economic fallout
As well as meeting US treasury secretary Scott Bessent at the IMF meeting this week, British chancellor Rachel Reeves has also been meeting with finance ministers from so-called ‘middle nations’ – large economies without the geopolitical heft to impact the Iran war directly – to coordinate a multilateral response to the crisis.
A joint statement has been released by Reeves and her counterparts, including ministers from Australia, Japan and Spain, calling for economies to respond “responsibly” to the crisis and “avoid unnecessary trade restrictions”.
In terms of the UK’s own response to the crisis, the Times reports that officials are drawing up ‘reasonable worst-case’ scenario plans for navigating shocks to food supply, health care and nuclear operations, among other areas.
For now, Reeves has announced that she will cut energy bills “by up to 25% for over 10,000 manufacturers from April 2027” through the British Industrial Competitiveness Scheme (BICS).
The scheme is being expanded to include 3,000 manufacturers, including in automotive, aerospace, steel and pharmaceuticals, and exempts eligible businesses from indirect costs of three electricity schemes: the Renewables Obligation, Feed-in Tariffs and the Capacity Market.
Despite the expansion, some industry leaders have told the Telegraph that the measures will be introduced too late to avoid factory closures and job losses in some sectors.
UK-EU reset latest
An annual ‘UK-EU Forum’ is taking place today in Brussels, amid increasing hopes that cross-Channel trade ties will be strengthened as part of an ongoing post-Brexit ‘reset’. The British government has called for closer ties with Europe in response to the increasingly fraught geopolitical situation.
EU trade commissioner Maroš Šefčovič spoke this morning, with Britains’ EU relations minister Nick Thomas-Symonds speaking this afternoon. We’ll bring you any headline quotes from the event in tomorrow’s ‘The Week in Trade’ feature.
One discussion point at the forum may well be the UK’s push for involvement in the EU’s €5bn Scaleup Europe Fund, according to the FT. The initiative is being designed to support promising European businesses in competitive tech sectors such as AI, quantum and semiconductors.
Also in trade today
· The UK posted better-than-expected GDP growth figures for February – the final full month before the war in Iran began – with a 0.5% month-on-month increase
· However, Taiwan has overtaken the UK in stock market value, a result of its booming semiconductor industry, the FT reports
· And the UK’s Office for Financial Sanctions Implementation marked a decade in operation with a new strategy and three-year agenda running to 2029
Yesterday in trade
· The system for processing US tariff refund requests will launch next week
· Hedge funds are looking to capitalise on businesses wanting to avoid the hassle of applying for the refunds
· The EU confirmed plans to double steel tariffs
You can read yesterday’s trade news here.
