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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 “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 worried about countries that have a large and persistent surplus in the trade balance with the United States. That is not the case for the United Kingdom,” the Chancellor of the United Kingdom Rachel Reeves told Andrew Ross Sorkin of CNBC.
“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,” he said, speaking to CNBC on the part of the World Economic Forum in Davos, Switzerland.
President Trump is very irritated by the US trade deficit with many of its partners, but trade with the United Kingdom has generally been more balancedsaw between surplus and deficit in recent years.
The latest UK trade data shows that, in the second quarter of 2024, the United Kingdom had a trade surplus of £4.5 billion ($5.5 billion) with the United States in goods.
As such, while China, Mexico, Canada and the EU are seen as the main targets for Trump’s trade tariffs, the UK could escape relatively unscathed, economists believe. Reeves expressed optimism about the prospects 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 said.
The finance minister of the United Kingdom is in Davos this week, to attract global investment in the British economy.
To achieve economic growth, he said: “We need more investment in the United Kingdom. And so my message to American investors and global investors is also: Great Britain is open for business, we want your investment”.
The trip comes after Reeves came under sustained pressure from the presentation of the Treasury’s spending and taxation plans last autumn.
The package of measures presented in the “Autumn Budget” centered on increasing the tax burden on British businesses and drew widespread criticism from industry leaders, who said the move 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, they also contributed to the continued discomfort in the Treasury.
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The UK found itself in more hot water at the start of the year, as the interest rate that investors were asking to hold UK bonds – known as gilts – rose sharply, reflecting market nervousness about the UK’s economic outlook.
Reeves held fast to his tax plans, saying that growing the UK economy is his first priority.
Commenting on the latest turmoil in the gilt market, the minister said on Wednesday that the country “was not immune to what is happening in the world markets”.
“What I will say, however, is that in the Budget that I established in October, I published the fiscal rules that this government will operate within. And those fiscal rules, to pay the daily expenses through the fiscal receipts. , and to reduce our debt as a share of our GDP – these fiscal rules are the basis of economic and fiscal stability.
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 unflattering comments about Trump in the past.
Unnatural advice when it comes to political ideology, Prime Minister Keir Starmer, Reeves and the British establishment are trying to build good relations with the White House, especially amid the potential threat of universal trade tariffs.
The Labor government has been targeted by close Trump ally Elon Musk in recent months, with the tech billionaire criticizing Prime Minister Starmer and Britain’s past investigations into child sexual exploitation.
Asked for his opinion on Musk’s interventions, Reeves said that Musk was “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
