Rachel Reeves has said she is “confident” trade flows with the United States will continue under President-elect Donald Trump despite his proposal to put up tariffs.
The chancellor was asked what implications the result of the American election will have on her plans for growth as she faced questions from the Commons Treasury Committee.
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It was put to her that investment banking company Goldman Sachs has downgraded its forecast for the UK’s economic growth next year from 1.6 to 1.4%, while EU officials are anticipating a reduction in exports to the US of €150bn (£125bn).
Ms Reeves said it is “too early” to start making changes to forecasts because of Mr Trump’s victory but that the UK’s trading relationship with the US is “absolutely crucial”.
“The US are our single biggest trading partner… trade between our two countries, I think it’s £311bn a year,” she said.
“I’m confident that those trade flows will continue under the new president.”
A tariff is a tax on imports or exports of goods between countries and is used to encourage or safeguard domestic industry.
Mr Trump has said he wants to increase tariffs on goods imported from around the world by 10%, rising to 60% on goods from China, as part of his plan to protect US industries.
Rachel Reeves. Pic: PA
According to analysis by Sky News correspondent Paul Kelso, it is a deeply protectionist move that could trigger a trade war with China and the EU.
Ms Reeves said the UK government will “continue to make the case for free trade” with him, adding: “We will make strong representations about the importance of a free and open trade, not just between ourselves and the United States, but globally.”
‘We’ll prepare for different eventualities’
Asked by Tory former Treasury minister John Glen if it was realistic to seek to influence Mr Trump, the chancellor said: “We’ve got another couple of months before the inauguration.
“Obviously we will begin those conversations. We’ll prepare for different eventualities.
“I absolutely do not want to sound in any way sanguine. On the other hand, I am optimistic about our ability to shape the global economic agenda, as we have under successive governments.”
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Trump wins: Demographics and key issues
Mr Trump’s victory in the US presidential election over Democratic opponent Kamala Harris has drawn a mixed reaction in the UK.
Prime Minister Sir Keir Starmer and Conservative leader Kemi Badenoch have both congratulated him on the “impressive” result and vowed to work closely with him.
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However, Liberal Democrat leader Sir Ed Davey said it was a “dark, dark day for people around the globe” as he called Mr Trump a “dangerous destructive demagogue”.
Mr Trump’s victory was confirmed when he surpassed 270 electoral college votes by winning Wisconsin, and he remains on course to claim all seven swing states.