Donald Trump has set his sights on VAT charges, warning that ‘every country’ will be hit with retaliatory tariffs – a move that could wipe an estimated £24billion from the UK economy
Donald Trump is poised to hit the UK with a massive 21% tariff on goods that could wipe billions from the economy.
Keir Starmer has been warned that the UK risks “getting caught in the crosshairs” after the unpredictable US President signed an alarming executive order. He said his administration will impose the “exact same tax or tariffs” on all imports – setting his sights on VAT.
Trump warned that “every country” that the US has a trade deficit with will be affected. His senior councillor for trade, Peter Navarro, said the EU’s VAT scheme – which is almost identical to the UK’s – is a “poster child” for unfair trade.
“President Trump is no longer willing to tolerate that,” he ominously warned – but did not specifically mention Britain. The UK imposes a 20% VAT rate on most sales including imports.
Asked about the threat on Sky News, Science Minister Peter Kyle said: “The first thing to reassure people is that we need a government with cool, clear thinking at times like this. And this is what you have with this government.
“We will assess, any changes and challenges that come down the line from any parts of the global, economy. And we will act appropriately in the best interest of Britain.”
On Thursday Trump said: “I have decided for purposes of fairness that I will charge a reciprocal tariff, meaning whenever countries charge the United States of America, we will charge them, no more, no less.
“In other words, they charge us a tax or a tariff and we charge them the exact same tax or tariff. Very simple. Nobody knows what that number is unless you go by the individual country, you can what see what it is if you go to the individual county and you look at what they’re charging us. In almost all cases they’re charging us vastly more than we charge them. Those days are over.”
If duties based on tariffs and VAT were combined, UK exporters would be hit with charges of around 21% – which would knock around 0.4 percentage points off GDP growth. This would be worth around £24billion, The Times reports.
Allie Renison, a former UK business and trade policy adviser, told the newspaper that the UK is in the “firing line for a huge economic hit”. It will also mean that the Government’s approach of not getting involved in a spat will be tested.
She said: “The reality is that it’s the EU that Trump is thinking about in targeting VAT, but the UK risks getting caught up in the crosshairs once again. The economic warfare net just keeps on getting wider, and the government may not be able to maintain its heads-down approach for much longer.”