Tariffs: Canada and Mexico

Question

15:01:00

Asked by

To ask His Majesty’s Government what communications they have had with the governments of Canada, Mexico and other countries about the decision of the President of the United States to impose tariffs on certain of their exports.

My Lords, we have noted President Trump’s announcement of tariffs on Canada and Mexico and the subsequent 30-day suspension agreement. That is a matter for the US Administration, and it is not for me to comment on another country’s bilateral trade relationships. We respect other countries’ dialogue with the US and we will not intervene. However, the UK Government are prepared to take action to mitigate the potential economic impact on our businesses and consumers. We will continue to monitor developments across the Atlantic.

My Lords, I thank the Minister for that reply and welcome the fact that, in his talks with the President of the United States, the Prime Minister managed to obtain at least a grudging hint that the UK might be exempt from proposed tariffs. Will she not agree, if there is a fully fledged trade war that affects our trading partners, that it will have an impact on the world economy and on our economy and growth rate, and make it more difficult to do what we want to do on defence spending? Secondly, if, as our newly appointed ambassador to the United States has said, there is a prospect of a UK-US technology deal, is it not extremely important that we take advantage of the extra flexibility that we have outside the EU to have a regulatory regime that is not hostile to the industries of the future but actually sees them as an opportunity for innovation?

The noble Lord raised several questions there. On the question of the UK and US, we have a strong economic relationship that is fair, balanced and reciprocal. As noble Lords know, the Prime Minister and President Trump discussed that on 27 February, when they agreed that we would deepen our relationship and have tasked teams to work together on a trade deal focused on tech. This is absolutely fundamental to us; the Prime Minister has been clear that he will not make any false choices between our allies—it is about our national interests. As the noble Lord rightly says, the Prime Minister has said that we are going further and we will work on an economic deal with advanced technology at its core—but these are early days to comment any further on this. Obviously, we will set out more details as discussions evolve.

My Lords, I commend the Minister’s first reply, which, as I understood it, was that while of course we will confer with colleagues and allies across the world, we will not intervene—it is a matter for them to deal with the United States. I also very much commend the noble Lord’s second comment when he recommended that we use, to off-set some of the damaging effects of Brexit, the opportunities of Brexit to manifest an acceptance of our point of view on the high-tech industries, because those are the industries of the future.

My noble friend makes an important point. Advanced technology is one of the key industries in our industrial strategy, and certainly one of the important areas for our future prosperity. We are committed to continuing our work with both the US and the EU to remove barriers to trade and to help UK businesses grow. Our number one priority is the growth of the UK economy, and free and open trade with our most economically important partners will be key to its delivery.

But, my Lords, our trade is so integrated with that of the European Union, and our trade policy is based on WTO rules. The Trump Administration imposing tariffs based not on trade policy but on other policy areas means that we will have to be a party to any WTO disputes if we are to protect our interests. One consequence of Brexit is that we have not followed suit with having an anti-coercion instrument, which would allow us to respond quickly if tariffs are put in place on non-trade policy areas. Does the Minister not agree that, for the resilience of the British economy and our trade, it would be better to co-ordinate with our European trading allies to have a common anti-coercion trade policy?

My Lords, as I said, we are committed to working with both the US and EU to remove barriers to trade and to help UK businesses grow. It is obviously very early days, and we will continue to take a cool-headed approach to any possible tariffs. We remain prepared to defend the UK’s national interest where it is right to do so.

My Lords, it is very welcome to hear the Minister talk about the national interest, because the importance of a trade deal with the US obviously cannot be overstated. Indeed, the British Chambers of Commerce estimates that if a deal could be reached it would provide business with a stable basis for up to £1.5 trillion of bilateral investment between the two countries. The Prime Minister has said, very wisely, that he is neither with the EU nor the USA, but the EU would seem to be taking a different view. A spokesman said that we need to make up our mind who we are with. Given the regulatory differences between the two entities, what steps are His Majesty’s Government taking to ensure that closer alignment with the EU does not hinder progress towards a comprehensive trade agreement with the US?

My Lords, as I said, we are committed to working with both the US and the EU to remove barriers to trade and to help UK businesses grow. The noble Lord is quite right to draw attention to the fact that the US is one of our largest trading partners, with trade worth around £300 billion in September 2024, representing 18% of total UK trade. We have a long and deep relationship with the US, and we will obviously want to enhance that as the trade discussions continue.

If President Trump imposes tariffs on the European Union and not, we hope, on the United Kingdom, what plans do His Majesty’s Government have to protect the part of the United Kingdom—Northern Ireland—that has been left in the EU for some hundreds of trading areas? How will we be affected and what will His Majesty’s Government do to protect the citizens of Northern Ireland?

My Lords, we will always consider businesses across the country and their particular interests. However, it is difficult to comment on specific tariffs when there are few facts and speculation is taking place. Northern Ireland is part of the UK customs territory and internal market, and goods moving into Northern Ireland do not subsequently enter the EU. We are considering what action would be in the best interests of all UK businesses and will make sure that the implications for Northern Ireland are considered in those discussions.

My Lords, the imposition of tariffs can have effects beyond trade. For example, this morning the New York Times reported that the Chinese foreign ministry is considering relaxing its co-operation with America on the import of the products necessary to make fentanyl. Fentanyl, along with other synthetic opioids, has been responsible for the deaths of hundreds of thousands in America. Are the Government ready for the reduction in China’s co-operation in this area and what might happen as a result, even in this country?

My Lords, we are aware that the US has imposed a tariff on all Chinese goods. I reiterate that it is not for me to comment on another country’s bilateral trade relationships—that is a matter for the US—but we are of course aware of China’s retaliatory response. We respect China’s dialogue with the US and will not intervene. However, the Government are prepared to take any necessary action to mitigate the potential economic impact on our businesses and will continue to monitor the situation.

My Lords, to return to the Minister’s first Answer, of course I am sensible that there are things that you do not say in public, but I hope that in private His Majesty’s Government are making it clear that we have an interest in free trade within North America. We are the largest investor in the US and we will be affected by US tariffs on every component part that will be hit by them. We also have an enduring interest in the prosperity of Canada. How can anyone in this country think of Canada without thinking of Vimy Ridge, Juno beach and a hundred other battlefields where it has stood alongside us? I hope we will make it very clear that free trade between the United States and Canada is a British national interest.

My Lords, Canada is a valued partner for the UK, including as a Commonwealth member state, and our shared ties are deep and historic, as noted by our respective Prime Ministers when they spoke on 5 February. Our trade relationship, which was worth more than £26 billion in the four quarters to the end of quarter 3 in 2024, supports jobs and businesses on both sides of the Atlantic. This is underpinned by our trade continuity agreement. These relationships are important and ongoing. We will continue these discussions and hope to further and deepen our ties with Canada in due course.