To ask His Majesty’s Government what assessment they have made of the impact on the UK economy of the announcement by President Donald Trump of increased tariffs, and what representations they plan to make to the government of the United States.
My Lords, the Supreme Court ruling does not affect the majority of trade under the economic prosperity deal, including the sectoral tariffs agreed on steel, pharmaceuticals and automotives. The Business Secretary spoke to his counterpart at the weekend and underlined his concerns about uncertainty for businesses and reinforced the need to honour the UK-US trade deal. We continue to engage with the Administration at all levels. Our priority remains to secure the best possible outcome for British businesses.
I thank the Minister for that helpful reply. Does he agree that, following the Supreme Court judgment, the decision of the United States President to impose, even on a temporary basis, tariffs of up to 15% is deeply damaging to confidence, both in this economy and in that of the United States? Can the Minister say a little more about what now remains of the trade deal negotiated by the Government less than a year ago, which was supposed to give us a preferential advantage over other European countries, but now we all face a universal global tariff of 10%?
Has the Minister also seen the warning over the weekend from the United States trade representative that, in order to assess what tariffs are necessary for the future, “most major trading partners” of America will face accelerated investigations into trading practices, which, of course, could include things such as pharmaceutical pricing, which were excluded from the agreement before? Will the Government undertake not just to defend Britain’s actions and Britain’s interests vigorously but also to ensure that the outcome of these discussions leaves us no worse off than we were before these unfortunate announcements?
The noble Lord raises a number of challenging and fast-moving issues, and I will try to respond as fully as I can. It is worth stating that the UK secured that preferential deal last year, driven by the Prime Minister’s direct engagement with President Trump. That was trying to give British businesses certainty and competitive advantages. The ruling at the weekend does not affect our preferential treatment in the key sectors such as pharma, cars and steel that the noble Lord mentioned.
The Business Secretary spoke to US trade representative Jamieson Greer this weekend, making clear our concerns about uncertainty and our degree of confidence in the honouring of those agreements that we needed, and he had those reassurances. UK officials across Whitehall and Washington are engaging intensively with the US as we speak, and those discussions will continue all of this week, at which time we can update the House. It is worth stating that we have always had a cool-headed and pragmatic approach to trade deals, and while I would not comment on other Governments’ policies, we do have a competitive advantage globally in the sectors we set out in the original negotiation. The biggest beneficiaries of this weekend’s announcements are those trade barriers coming down for other countries, but we still have the best deal globally, and we continue to negotiate to retain that preferential position.
My Lords, would the Minister say whether the Government’s information leads them to suppose that the President’s choice of 15% and its differential impact on countries was deliberate or inadvertent?
As a Minister only six months into the job, I have uncertainty in my own mind sometimes; I am certainly not going to comment on the US President. What I can say is that we remain the only country that has secured a 10% tariff on auto, securing hundreds of thousands of jobs; we are the only country in the world with a 0% tariff on pharmaceuticals; and we are the only country in the world to benefit from a 25% tariff on steel, aluminium and other derivatives. We believe that we will retain those competitive positions, but our position is to control the controllables that we have today and negotiate to retain those benefits for UK businesses.
My Lords, I am sure that industry is grateful for the sympathy the Minister has expressed from the Dispatch Box, and we are all encouraged by the hopes that the Government have expressed. But we all know that the opinions of trade officials often differ from those of the President. The uncertainty that is now surrounding all of British manufacturing is huge. What advice are the Government now giving to manufacturing businesses? What conversations have been had with the manufacturers, and how should they behave in the light of this huge uncertainty?
The question of certainty, raised by the noble Lords, Lord Lamont and Lord Fox, is critical to business. We live in a world that is changing rapidly and evolving minute by minute—I just checked my BBC feed on my way into the Chamber this afternoon. What I can say is that this Government have a plan: for the first time since the 1960s, we have an industrial strategy that focuses on our competitive advantage in automotive, technology and pharmaceuticals. It remains important to have clarity on our comparative advantage, and we remain in negotiation with all those key sectors; indeed, the pharmaceutical sector has the most preferential deal globally. I was due to have a meeting at 3 pm today with the pharmaceutical sector, and this has overridden that. These are fast-moving events. We remain cool-headed, trying to negotiate on behalf of UK businesses, and we are confident that our preferential relationship with the US will bear dividends as things develop this week.
My Lords, I know that history does not always repeat itself, but would it be a kindness at this stage to remind President Donald Trump that the American tariff protections of the 1930s by Smoot and Hawley played a major part in accelerating the onset of the Second World War?
My Lords, the Minister quite rightly referred to pharmaceuticals and their importance. Can he clarify whether the derogation regarding pharmaceuticals will include the equipment and technology used for testing the need for and application of pharmaceuticals?
My Lords, while we welcome the industrial strategy that was mentioned by my noble friend the Minister, does he agree that, in these deeply uncertain times when there is much instability, the reset with the European Union on which our Government have embarked grows in importance by the day?
As I mentioned, the cool-headed approach that the Government are taking includes many of our global trading partners. It is worth reminding the House that, while the US is a critical trading partner, with £330 billion of bilateral trade, the EU makes up 40% of our global trade and is an incredibly important partner, so those negotiations are ongoing. We have to redefine our position in the world, not just with the EU but as we have done with our trade deal with India and as we are doing with the Gulf states et al. It is undeniable that our relationship with Europe will be critical to our economic growth over the coming decades.
My Lords, somewhat bizarrely, the trading partners of the US that are the greatest beneficiaries of President Trump’s new regime are Brazil, China and India, which are currently looking at net falls in their tariffs of 5% to 13%, while the UK, in spite of our preferential status, will see a net average tariff increase of 2.1%. That is the highest rate in Europe and compares with the eurozone’s 0.8%. I am quoting figures from Global Trade Alert, a trade monitoring service. Does the Minister recognise these figures, and what is his reaction to them?
I recognise the figures quoted, but they are speculation at this stage. The deals on preferential rates for farmers, automotive, et cetera were agreed terms, but that was the beginning of the negotiations, not the end. The preferential deal that was secured was brought about by direct engagement between the Prime Minister and President Trump. The EPD negotiations remain ongoing, and we will look to further protect the UK’s interests with further announcements over the coming weeks. It is worth reminding the House that the UK was the first country to see tariffs removed for civil aerospace goods, and we remain the only country to retain those secured 10% tariffs on automotive, steel and aluminium. We are prepared to fight for British businesses from here on in as well.