The º£½ÇÊÓƵ's economy is at risk of suffering a £24bn hit due to President Donald Trump's proposal to levy tariffs on nations that impose VAT.
Trump unveiled his intention to introduce reciprocal tariffs last night, explaining to journalists his view that VAT acts as a tariff against US exporters, as reported by .
"I have decided for purposes of fairness that I will charge a reciprocal tariff, meaning whenever countries charge the United States of America, we will charge them, no more, no less," he declared at the White House.
He further clarified, "In other words, they charge us a tax or a tariff and we charge them the exact same tax or tariff. Very simple," Trump elaborated.
Unlike the US, which lacks a nationwide sales tax and where only 45 of the 50 states implement VAT at generally lower rates than Europe, the º£½ÇÊÓƵ could be significantly impacted by such tariffs.
Deutsche Bank's head of FX research, George Saravelos, has calculated that º£½ÇÊÓƵ exporters might face additional charges of 21 percent as a consequence of Trump's policy.
This could result in a reduction of around £24bn from the º£½ÇÊÓƵ economy over the next two years, as per Ahmet Kaya, an economist at the National Institute of Economic and Social Research.
William Bain, who leads trade policy at the British Chambers of Commerce, commented that these measures would generate "more cost and uncertainty for investors, businesses and consumers around the world".
Nonetheless, he advised the government to steer clear of being drawn into a "sucked into a trade war of tit-for-tat tariffs, which could easily spiral out of control."
Pat McFadden, Chancellor of the Duchy of Lancaster, urged caution, saying the government would not "overreact" but rather "wait and see" whether the tariffs are actually implemented.
"It will need to adopt a flexible and agile response, while assessing the reaction of other major players. But it must make the most of the time available before the introduction of these tariffs to negotiate with the US on alternative arrangements," he said.
