UK-US Trade and Tariffs

Debate between Lord Purvis of Tweed and Baroness Gustafsson

Thursday 3rd April 2025 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, this is my first opportunity to ask the Minister questions. I give her my belated welcome to the portfolio. She is in a new world when it comes to the unjustified and aggressive trade war that the United States has been launching. My party was forged out of a campaign for free trade. We broke with others when they introduced protectionism. Our principled position on Brexit was based on a rejection of new barriers, new costs and more bureaucracy for businesses and uncertainty for consumers. These same principles apply to our revulsion at the unwarranted and unjustified applications of the new tariffs.

They are, of course, on top of the pre-announced automotive, steel and aluminium tariffs. We should also recall the existing tariffs on UK exports to the United States. It means that, to take one example that is very close to my heart as I represented a textile-producing constituency in Scotland, the cashmere industry, the highest-quality sustainable product in the world now has a 35% tax tariff on exporting to the United States. What support are the Government intending to provide to some of our key exporting sectors now, rather than waiting until after a consultation? These Benches believe that we should have been consulting in advance of the announcement, as Canada did, not after it, so that we had a prepared proposal for a clear statement of intent, rather than a hope for the best in any agreement.

Part of the Statement today that surprised and disappointed me was the news that only if we have not secured an economic agreement with the US will we propose corrective measures. This means that the timetable of UK actions is in the hands of the Trump Administration, not in the hands of our Government, and that surely is not acceptable. It is our duty to represent the interests of British industry and consumers, not the United States.

Can I also ask for clear language? It now seems that we are simply seeking an economic agreement rather than a free trade agreement. What are we seeking from the Trump Administration? There is a world of difference between a comprehensive free trade agreement and cobbling together a number of bilateral agreements on services and goods simply to make a show of reaching some form of agreement. If the Minister could be clear in the language, I would be grateful.

Furthermore, I sincerely believe that we have showed too much of our market offer to the United States, so it can see clearly the areas where we are willing to cede decision-making: closing tax avoidance for UK companies with profits over €20 billion that are not paying their fair share of tax within the United Kingdom; aligning our AI and data regulations to what the Trump Administration want rather than what this Parliament has legislated for; and reducing agricultural and food standards. Every other country with which we may seek an FTA now knows the areas where this Government are open to ceding ground. That, surely, is regrettable.

Two responses today require more scrutiny: one from the Government and one from the Conservatives. The Statement says that the wholly unjustified tariff rate “vindicates” the Government’s “pragmatic approach”, but we know that, as far as the Trump Administration are concerned, the United Kingdom is in the same category as El Salvador, Guatemala and Uruguay—none of which even flourished a cringeworthy letter from a King in the Oval Office. The worst element of the Trump Administration applying the 10% tariffs is that we are now in the same category as Russia, for goodness’ sake. How is it a vindication of our pragmatic approach if Trump sees trading with the United Kingdom as the same as trading with Russia?

The second argument we have heard today, including a bit that we got from the noble Lord, is that we may have fared better because we are out of the EU rather than in it—but that is only if we are starting from a higher base than what the reality is, with the biggest barriers that we have erected for our near trading neighbours. But the critical point is that the United Kingdom, for goods in particular but for services too, is one of the most interconnected trading economies in the world. Nearly 70% of our exports to the EU are intermediate input to the production of other goods and services, and the majority of UK goods manufactured in the UK are intermediate. Therefore, the majority of the goods that we make source parts and components from the EU, so we are impacted by the 20%. Will the Government’s assessment of the impact be not just a sectoral analysis but a full trade analysis, including all the impacts of what will be applied to our biggest trading market?

Even the former Conservative Trade Minister Greg Hands said today that, as a result of Brexit, we now have a more complex means by which we are steering a path in the US-EU trade war. It is even harder, because the more concessions we give to the United States, the further we move away from the TCA. What is the Government’s assessment of trying to triangulate between the EU and the US? We on these Benches believe that the response has to be deeper co-ordination with the European Union.

Before I close, an element that has not been mentioned today, which is particularly close to my heart, having co-chaired the All-Party Parliamentary Group on Trade out of Poverty for so long, is that this Parliament has debated long and hard about our relationship with developing economies, many of which are being hit very hard by the Trump Administration, and the response of this Government is to cut official development assistance and technical support for trade facilitation for developing economies. Our response is to be silent to the Trump Administration but to cut trade facilitation for emerging economies. This cannot be right for the United Kingdom as a free-trading nation.

As I close, my appeal to the Minister is that we need urgent full co-ordination with Canada and the European Union, not necessarily just on the potential corrective mechanisms that may well be necessary and we believe will be justified, but to ensure that there are fully co-ordinated anti-coercion measures. These are not trade measures being introduced by the Trump Administration; they are economic coercion measures, and it was a tragedy that the previous Government dropped the anti-coercion instrument that we could have continued as a result of Brexit. We need urgent clarification on that.

Finally, we need a European Union-UK-Canada co-ordinated response—I will call it Eureka. In response to the Trump Administration, we need a Eureka moment, not just a wait-and-see approach.

[Baroness Gustafsson (Lab)]

I thank the noble Lords, Lord Hunt and Lord Purvis, for their contributions. I feel that what I hear is a genuine, shared passion for supporting our businesses here in the UK, but also a sadness at barriers to the open trade that so many of us have valued for so long.

There is a shared desire to avoid escalating retaliatory tariffs. The UK and the US have shared a fair and balanced relationship, one that has benefited both sides for many decades. We will both benefit as we strengthen this relationship further. Of course, we are disappointed by the US announcement last night of the 10% reciprocal tariff on UK exports and by the 25% global tariff on cars that has been imposed today. This follows tariffs of 25% on US imports of steel, aluminium and derivative products that were announced on 12 March.

I understand the desire for clarity and urgency, and for a simple answer that can allay the many fears that are rightly troubling businesses at the moment, but this is a complicated environment and a complicated problem. Unfortunately, complicated problems rarely have simple answers. The reality is that it is going to be a co-ordinated effort, where we work out, together with our businesses and industries, a solution that is thoughtful, pragmatic and calm, informed by the data and not by the emotions that many of us may be feeling.

The Secretary of State has been clear that we will always act in the best interests of UK businesses and consumers. As your Lordships know, throughout the last few weeks the Government have been fully focused on discussions on an economic deal with the US. We remain committed to doing this deal, which we hope will mitigate some of the impact that has been announced. I hope that, as the noble Lord, Lord Hunt, referred to, the House is not reading that there is cause for celebration in any of the news that we have announced. I hear the temptation to turn to the other names on the list of tariffs and draw comparisons, but that temptation is to turn inwards and point fingers. I urge all of us to avoid that temptation and instead think about how we work together with that wider community to support all our domestic economies.

We reserve the right to take action if a deal is ultimately not secured. That is a key part of why we are today launching a request for input on the implications for British businesses of possible retaliatory action. This is a formal step, necessary for us to keep all options on the table, but also to form our understanding of how those key areas will be influenced. This exercise will also give businesses the chance to have their say and influence the design of any possible UK response. After all, we are acting on behalf of those UK businesses. I hear the call by the noble Lord, Lord Hunt, that the ball is now in our court. The Government’s preference is to resolve these tariffs through a mutually beneficial deal. They have also been clear that they will always stand up for that national interest. This is why that request for input is so important: to inform the Government’s preparation of their options.

We know that it is a concerning time for both businesses and consumers, but it is important to note that this Government have made plenty of decisions which will have a positive impact on the economy in the weeks and months ahead. We are putting more pounds in people’s pockets by freezing fuel duty; boosting the minimum wage by up to £1,400 a year; and protecting working people, with no rise in their national insurance, income tax or VAT. Living standards are growing at their fastest rate in two years and the Spring Statement showed that each person will be £500 better off by the end of the Parliament. The OBR has said that the economy will grow every year from 2026 and that our planning reforms will lead to a 0.2% increase of GDP, worth £6.8 billion.

The UK remains an open, outward-looking nation and one of the world’s leading advocates for free trade. We have also joined the CPTPP trading bloc, and we continue to pursue export-boosting trade deals with the Gulf Co-operation Council and industrial giants such as India. Our number one priority is growing the UK economy. A positive trading relationship with all our trading partners, including the US, the EU and all these others, will help us deliver that. I hear the call for a full trade analysis and understanding of when future export opportunities will be available to us.

As we think about the impact on the automotive industry, we think about our key industries in the UK. We have used our industrial strategy to strengthen the UK’s automotive competitiveness. The Budget committed over £2 billion of capital and R&D funding to 2030 for zero-emission vehicle manufacturing and its supply chains. This long-term commitment is a vote of confidence in our automotive industry, supporting investment in its transformation as we accelerate to zero-emission vehicles. There was also over £300 million announced in the Budget to drive uptake of electric vehicles.

Our industrial strategy will continue to be unreservedly pro-business, engaging on complex issues that are barriers to investment, such as energy prices and access to finance and skills—all through the lens of promoting investment. Getting the transition right and supporting the growth of the electric vehicle market in the UK could unlock a multibillion-pound industry and deliver high-paid jobs for decades to come.

How will this impact our neighbours? I am thinking about the Windsor Framework in particular, and the opportunities for businesses to protect themselves through the Windsor Framework duty reimbursement scheme that has been referred to. This scheme is there to support businesses, ensuring that they can use it to mitigate any costs that may come from possible tariffs. Businesses should be able to contact HMRC for any information about the scheme. It will of course be a formative part of the advice to businesses we are giving through the great.gov website.

I understand that working closely with businesses to make sure they have all the information they need is really important. The request for input has been opened and that information is already becoming available. It came online today, and we have already seen a significant number of requests and input coming through that process.

This Government were elected to bring security back to working people’s lives. Businesses and workers alike are looking to this Government to act in the national interest and navigate Britain through this period. We will continue to progress on securing a deal that secures our industries while keeping all our options on the table.