The chancellor declared that the world had changed, and just hours later, it underwent yet another transformation.
The phrase has gained notable traction at Westminster in recent days, serving as the rationale behind Rachel Reeves’s shift in priorities and spending cuts announced in her Spring Statement.
When government officials assert that the world has changed, they are, at least in part, referring to Donald Trump’s return to the White House, which has left them uncertain about future developments.
In a recent news conference, the President of the United States announced that Washington plans to implement a 25% import tax or tariff on all vehicles imported from abroad. This move reflects a significant shift in trade policy, merging elements of both stagecraft and statecraft.
The Society of Motor Manufacturers and Traders reports that the United States is the second largest car export market for the UK, after the European Union.
As Trump’s second term progresses into its third month, the UK government’s approach has been characterized by a preference for private negotiations and a deliberate restraint in public statements.
The phrase “If in doubt, say nowt” encapsulates a cautious strategy that avoids discussing the president’s actions, likely to sidestep any potential backlash from his reactions.
In parallel, efforts are ongoing to finalize a trade agreement between the United States and the United Kingdom, a move that could offer some protection against Trump’s unpredictable actions and statements.
The current landscape highlights that uncertainty has become the prevailing norm, with significant resources being devoted by the government to anticipate potential developments. This proactive approach involves negotiating and mitigating the impacts of expected changes, reflecting a strategic response to an unpredictable future.
The Office for Budget Responsibility (OBR), an independent forecaster, faces the challenging task of making economic projections in a climate of significant uncertainty, yet it continues to make its assessments.
The Office for Budget Responsibility (OBR) has issued its latest economic and fiscal outlook alongside the chancellor’s Spring Statement, noting with notable restraint that “following the election of a new US administration in November, US trade policies and those of its major trading partners remain in flux.”
That sentiment is certainly worth repeating.
The OBR meticulously examines a range of scenarios over five pages in response to a significant 20 percentage point increase in tariffs imposed by the US.
The analysis begins by focusing on nations outside the UK, followed by a comprehensive examination of all countries, including the UK. Finally, the discussion will revisit all countries, including the UK, specifically addressing those that impose equivalent tariffs on US goods in return.
Turn to page 40 to explore the content firsthand.
The forecaster suggests that the most severe scenario, which includes retaliation, “would almost eliminate the headroom against the fiscal mandate.” This implies that it could effectively nullify all the budgetary adjustments and trade-offs that Reeves has been managing in recent weeks.
Goodness gracious.
Consequently, numerous ministers will be eager to steer clear of any situation resembling this unfolding.
A significant increase in new tariffs is expected just days before what Trump has labeled “Liberation Day” next Tuesday.
The chancellor told the BBC that “intense negotiations with US counterparts” are underway to discuss “cars, steel, and every other kind of tariff.”
Reeves stated that “a few more days left of those negotiations” remain, emphasizing the desire to avoid entering a trade war.
The world is undergoing significant transformations and remains in a state of flux.
