UK urged to deploy EU-style ‘trade bazooka’ against Trump’s tariffs

UK business leaders have called on the government to build an EU-style “trade bazooka” to protect Britain’s economic interests in response to the latest tariff threats from Donald Trump.

As transatlantic tensions rise, the British Chambers of Commerce said the UK’s “inadequate economic security” was putting growth and jobs at risk.

The lobby group, which represents thousands of firms, urged Keir Starmer to take the lead in protecting Britain from external crises, saying there had been “years of neglect by successive governments”.

Geopolitical tensions, the impact of Brexit, the Covid pandemic, and wars in Ukraine and the Middle East mean UK companies are navigating an increasingly fraught global backdrop for international trade.

The US president last week threatened to impose “a big tariff” on the UK unless it drops a digital services tax that impacts US technology companies.

In a report setting out recommendations to help stop the decline of British competitiveness in an increasingly unstable world, the BCC said urgent steps were required to protect companies from other countries’ punitive trade policies.

Among its top priorities was for the UK to mimic the EU by creating a “trade bazooka” to deter other countries from making threats designed to bully Britain into changing its economic policies.

Brussels’ trade bazooka, more formally known as its anti-coercion instrument, enables the bloc to impose sweeping restrictions on goods and services trade with an aggressor state.

These can involve limiting access to public procurement programmes and financial markets, as well as restrictions on property rights and foreign direct investment.

The BCC also urged ministers to take a “robust approach” to the EU’s Made In Europe agenda to ensure UK businesses had a role in wider European supply chains. It called for UK firms to play a bigger role in UK defence procurement, and for the prime minister to create a new economic security cabinet committee.

The BCC said in its report: “The government must add a ‘trade bazooka’ to its arsenal of responses to threats of economic coercion.

“New legislation should include powers for ministers to use a range of levers, from duties to market access, to enhanced investment scrutiny and subsidy control. But there must also be appropriate safeguards to protect UK commercial interests.”

Shevaun Haviland, the director general of the BCC, said it was clear that the government should prepare to take a more muscular response amid the increasingly fraught global landscape.

“The UK’s inadequate economic security has become a drag on growth, competitiveness and national strength; yet it is still not given the focus and urgency it demands,” she said.

The UK’s minister for trade, Chris Bryant, said: “This report correctly identifies that free and fair trade is essential to the UK’s prosperity, and we want to ensure open markets aren’t distorted by those who try to use trade as a weapon.

“That’s why we’ve already taken action, from identifying eight key sectors as part of our modern industrial strategy to strengthening supply chains to reduce our vulnerability to market shocks, and seeking views if the UK needs additional, last-resort tools to defend against acts of economic pressure if diplomacy isn’t enough.”

He added: “Just last month I was in Europe to lobby on behalf of businesses as part of our Made in Europe campaign, and I look forward to continuing to work with the BCC and stakeholders to keep the UK open and secure.”

Britain hitting US service-sector firms with retaliatory measures would carry risks given the scale of US economic involvement in the UK.

The US is Britain’s largest single trading partner, accounting for about a fifth of Britain’s global trade, and US companies also have more than £640bn invested in the UK.