UK commitment to free trade will be tested by US tariffs, senior MP warns
Dame Meg Hillier also said there had been ‘unrest’ among the Labour rank and file following welfare cuts announced by ministers in recent weeks.
The Government’s commitment to free trade is going to be tested over the next few weeks as Donald Trump’s tariffs come into force, a Labour former minister has warned.
Dame Meg Hillier, the chair of the Commons Treasury Select Committee, also said there had been “unrest” among the Labour rank and file following welfare cuts announced by ministers in recent weeks.
US president Mr Trump announced this week tariffs would be introduced on all cars imported to the US, a measure expected to hit British luxury car makers like Rolls-Royce and Aston Martin.
The levy on cars is on top of a series of reciprocal tariffs set to come into effect on April 2, which could include a general 20% levy on UK products in response to the rate of VAT.
The new trade taxes come into force just after Rachel Reeves made a series of spending cuts at the spring statement in order to restore a narrow buffer for her public spending plans.
The Office for Budget Responsibility, a watchdog on Government spending, has warned the tariffs could wipe out the prospect of economic growth.
The Institute for Fiscal Studies think tank has meanwhile claimed Ms Reeves £9.9 billion fiscal headroom, which is considered very small by historic standards, could be eroded by global events outside her control.
Speaking to BBC Radio 4’s Week in Westminster programme, Dame Meg said Ms Reeves had “inherited a very bad hand” after the election, and was now being impacted further.
The Treasury committee chair told the BBC “I don’t think she (Ms Reeves) would imagine for a minute that it’s all going to be an easy run to the budget in the autumn, but she’s been very clear that she’s not going to raise the taxes that she ruled out during the general election.”
Ms Reeves is among the ministers who has insisted the UK is a pro-free trade nation and will not introduce reciprocal tariffs on the US.
The OBR has warned the impact of doing so would be worse for the UK than allowing the levy to go ahead unimpeded.
Ministers are currently attempting to negotiate an exemption from the tariffs, with reports suggesting a tax on American big tech companies could be reduced or even abolished in exchange for a carve out on British imports to the US.
Sir Keir Starmer has also said the UK is committed to open trade, but signalled the UK “reserves the right” to respond to the US tariffs if it is in the national interest.
Speaking of the Chancellor’s position on free trade, Dame Meg said: “That was obviously going to be very much tested in the next few weeks.”
Dame Meg was also asked about dissatisfaction among Labour backbenchers over the welfare cuts introduced by the Government in recent weeks.
She told the programme: “There’s some unrest, and I think some of the communications on it have been unfortunate.
“Rhetoric can really frighten people, the people who are claiming benefits or disabled or are thinking they may need to we’ve seen rather sometimes bad headlines, sometimes I’m afraid, generated.”
