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Sir Keir Starmer has told business leaders he will redouble efforts to secure a trade deal with the US after early negotiations failed to stop President Donald Trump slapping a 10 per cent tariff on all British exports. 

There are serious concerns in Downing Street about the impact on the UK economy of a breakdown in global trade, as well as the hit to Britain’s car and steel exporters that will face penalties of 25 per cent. 

“Clearly there will be an economic impact from the decisions the US has taken both here and globally,” the prime minister told business leaders at a Downing Street breakfast on Thursday. “But I want to be crystal clear: we are prepared.”

There was some relief that Britain was subject to the lowest baseline tariff imposed by Trump on Wednesday, which was half the 20 per cent levy on EU exports.

But the tariffs are likely to cost thousands of jobs across the UK, and eat into the financial headroom set aside by chancellor Rachel Reeves to hit her fiscal rules.

If the UK’s economy is knocked off course by the trade war, the chancellor may be forced to raise taxes or cut government spending to hit her fiscal rules later in the year.

The manufacturers’ association Make UK described the levies as “devastating” for British industry.

Stephen Phipson, chief executive of Make UK, said: “The US president’s announcement of 10 per cent tariffs on UK goods exported to the United States and 25 per cent tariffs on British-made autos, steel and aluminium is devastating for UK manufacturing.”

Scotland’s deputy first minister Kate Forbes also warned that a 10 per cent tariff could cause £200mn-£400mn of losses to the Scotch whisky industry, which sells about £1bn of exports to the US each year.

William Wemyss, founder of Wemyss Family Spirits that operates Kingsbarns distillery near St Andrews, said: “The US is our single largest export market, and demand remains strong, but tariffs inject real uncertainty, particularly for independent producers like us.”

The fact that Trump has handed Britain a more favourable tariff rate than the one he imposed on the EU could create tensions with Brussels at a time when Starmer is trying to “reset” post-Brexit relations.

Starmer also faces a political danger if he is perceived to be refusing to stand up to Trump, when allies such as the EU and Canada are fighting back with retaliatory tariffs.

For now Starmer’s priority is to try to finalise a trade deal with the US, with ministers saying their ultimate goal is to remove the 10 per cent general US tariff on British goods, and the 25 per cent levy on auto and steel products.

Jonathan Reynolds, business and trade secretary, will update MPs on the British response on Thursday. He told the BBC: “It’s important that nobody is in a better position than the UK but I’m disappointed by anything that makes our trading position more difficult.”

The 10 per cent baseline tariff was also applied to many other countries and largely reflected Britain’s balanced trading relationship with the US, rather than the recent trade talks.

Nevertheless, Downing Street claimed on Wednesday that the prime minister’s patient diplomacy with Trump had saved thousands of jobs. “We don’t want any tariffs at all, but a lower levy than others vindicates our approach. It matters because the difference between 10 per cent and 20 per cent is thousands of jobs,” said a Number 10 official.

An outline term sheet for a US-UK trade deal that is on the table in Washington includes Britain offering to dilute or scrap its digital services tax and a reduction on some meat and seafood tariffs. The deal has yet to be signed off by Trump.

Lord Peter Mandelson, Britain’s ambassador to the US, is also pursuing a parallel track aimed at securing a tech agreement with Washington that would involve closer co-operation in areas such as artificial intelligence and space.

Starmer, who is facing criticism for ceding too much ground to the US — including powerful tech companies — said: “I want to be clear. I will only strike a deal if it is in the national interest.”

Reynolds has been talking to industries that are in the line of fire from Trump’s tariffs — including sectors such as steel and automotive — and most UK business leaders have told him that the focus should be on finding a trade deal to cut the levies.

Liberal Democrat leader Sir Ed Davey called on Starmer on Wednesday to work with the EU, Canada and other partners in forming an “economic coalition of the willing” to take on the US president.

Reeves has warned MPs that even obtaining a special deal on US tariffs “doesn’t mean somehow we are out of the woods and not impacted by tariffs”.

Shadow business secretary Andrew Griffith said on Thursday: “The silver lining is that Brexit — which Labour ministers voted against 48 times — means that we face far lower tariffs than the EU.”

The prospect of the EU imposing retaliatory tariffs on the US but the UK refusing to do so throws up another problem for Starmer: the fallout for Northern Ireland and its sensitive post-Brexit settlement.

The region, which has remained in the EU’s single market for goods under a post-Brexit trading deal, is also part of the UK customs territory and is subject to a complex web of trading rules.