British Chancellor of the Exchequer Rachel Reeves listens during the 11th China-UK Economic and Financial Dialogue on January 11, 2025 in Beijing, China.
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The United Kingdom is “not part of the problem” when it comes to the “persistent” trade deficits that President Donald Trump wants to address, the country’s finance minister told CNBC on Wednesday.
“I understand that President [Donald] Trump is concerned about countries that have large and persistent trade surpluses with the US, which is not the case for the UK,” UK Chancellor Rachel Reeves told CNBC’s Andrew Ross Sorkin.
“We are not part of the problem here. So we, the United Kingdom, increased trade with President Trump the last time he was in office,” she said, speaking to CNBC on the sidelines of the World Economic Forum in Davos, Switzerland.
President Trump has been frustrated by the US’s trade deficits with many of its partners, but trade with the UK has generally been more balanced, seeing between surplus and deficit in recent years.
The latest UK trade data shows that, in the second quarter of 2024, the UK had a trade surplus of £4.5 billion ($5.5 billion) with the US in goods. However, in the second quarter of 2023, the UK had a trade deficit in goods with the US of £2.3 billion.
As such, while China, Mexico, Canada and the EU are seen as prime targets for Trump’s trade tariffs, the UK could escape relatively unscathed, economists believe. Reeves expressed optimism about the outlook for UK-US trade.
“There is absolutely no reason why our two great nations, with such a strong and special relationship, cannot increase those trade flows once again,” Reeves commented.
The UK Chancellor of the Exchequer is in Davos this week, trying to attract global investment to the British economy.
To achieve economic growth, she said, “we need more investment in the UK and so my message to US investors and global investors too is: Britain is open for business, we want your investment.”
The trip comes as Reeves has been under constant pressure since the Treasury’s tax and spending plans were revealed last autumn.
The package of measures presented in the ‘Autumn Budget’ focused on increasing the tax burden on British businesses and has drawn widespread criticism from industry leaders, who said the measure would stifle investment, jobs and growth.
Recent data releases, including lower-than-expected growth data for November and higher-than-expected government borrowing costs in December, have also contributed to continued concern at the Treasury.
Relationship disorders
The UK found itself in more hot water at the start of the year, as the interest rate investors sought to hold UK bonds – known as gilts – rose sharply, reflecting market concerns over the economic outlook. of the UK.
Reeves has held firm on her fiscal plans, saying growing the UK economy is her top priority.
Commenting on the recent nut market turmoil, the minister said on Wednesday that the country was “not immune to what happens in global markets”.
“What I would say, though, is that in the Budget that I set out in October, I set out the fiscal rules within which this government will operate. And those fiscal rules, to pay for day-to-day spending through tax bills. , and to reduce our debt as a share of our GDP – those fiscal rules are the basis of economic and fiscal stability, they are non-negotiable and we will continue to meet them.
The election of Donald Trump last November represented another headache for the centre-left Labor government, with a number of ministers, such as Foreign Secretary David Lammy, making less than flattering comments about Trump in the past.
Unnatural bedfellows when it comes to political ideology, Prime Minister Keir Starmer, Reeves and the British establishment are seeking to build good relations with the White House, especially amid the potential threat of universal trade tariffs.
The Labor government has taken aim at close Trump ally Elon Musk in recent months, with the tech billionaire criticizing Prime Minister Starmer and the British. past child sexual exploitation investigations.
Asked for her opinion on Musk’s interventions, Reeves said Musk “is entitled to his opinion, but he is not one of the people voting in the UK general election”.
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— CNBC’s Ruxandra Iordache contributed reporting to this story