Donald Trump’s VAT tariff war ‘could hit Britain harder than China’ as experts fear move could cost UK economy £24billion
Britain could be hit harder than China by Donald Trump’s latest trade war, it is feared.
The US President has vowed to impose ‘reciprocal tariffs’ in retaliation for the taxes American companies have to pay worldwide.
He has ordered his officials to calculate how much each country charges US exporters in ‘unfair, discriminatory, or extraterritorial taxes’ including ‘a value-added tax’ – and then strike back with identical levies.
The UK could suffer particularly badly as VAT stands at 20 per cent on most goods – higher than elsewhere.
Analysts at Capital Economics said VAT and tariffs would mean a 24 per cent levy on UK exports to the US.
By contrast, Chinese exports have been hit by only a 10 per cent tariff since Mr Trump returned to the White House. Its VAT rates are lower than those in the UK.
Some experts estimate it could deal a £24billion blow to Britain’s faltering economy – severely damaging the Government’s drive for growth.
Mr Trump has already declared 25 per cent tariffs on steel and aluminium imports.
Former UK business policy adviser Allie Renison said: ‘It’s the EU that Trump is thinking about in targeting VAT, but the UK risks getting caught up in the crosshairs.’
But Labour ministers are refusing to criticise the plans or announce any retaliation.
Cabinet Office minister Pat McFadden insisted that the Government would not ‘overreact’ but ‘wait and see’ whether the tariffs ‘actually come to pass’.
Science Secretary Peter Kyle replied when pressed by Sky News on whether the Government would respond with retaliatory measures: ‘What I said is that we will have a cool, clear look at what’s in the national interest, and we will respond accordingly, based on what we actually have in fact.’
By contrast the EU hit back angrily at Mr Trump’s vow to impose reciprocal tariffs.
European Commission president Ursula von der Leyen said ‘trade wars and punitive tariffs make no sense’, warning that ‘unjustified tariffs on the EU will not go unanswered’.
