“A trade war is in no-one’s interest”.
They were Sir Keir Starmer’s words on Monday as he ruled out imposing retaliatory tariffs on the United States since Donald Trump raised the stakes in his battle with Europe for control of Greenland.
The US president has threatened further trade charges against his NATO allies unless he gets his way.
Here, Sky News explains the detail behind those threats and what they could mean for Western economies at a time when their military alliance is under threat in a way never seen before.
Money latest: How financial markets have reacted to Trump threats
What is Trump up to?
The US president wants to buy Greenland, citing national security grounds, in the strategically important Arctic.
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The territory also has a vast mineral wealth.
But this demand is unacceptable to Danish-controlled Greenland and Europe’s leaders who argue that ownership is a matter for the people of Greenland and Denmark.
What has the president threatened?
Mr Trump said at the weekend he would deploy a phased increase in trade tariffs on NATO allies refusing to support his plan.
As such, he wants to charge Denmark, Norway, Sweden, the UK, France, Germany, the Netherlands and Finland a 10% tariff “on any and all goods” sent to the US from 1 February.
The aim is to make their goods less attractive to US importers, harming European companies and economies in the process.
This 10% tariff would increase to 25% from June unless a deal is agreed.
Starmer says Trump not prepared to use military force to take Greenland – latest updates
What does this mean in practice?
Essentially, it gives European nations less than two weeks to come up with a plan to satisfy Trump or face new tariffs.
Is this a play by the president?
While it is clear he is deadly serious about securing Greenland, we have seen before that negative reactions on financial markets to trade war threats have driven changes of heart at the White House.
Climbdowns over the worst of his plans last year gave rise to the acronym TACO – Trump Always Chickens Out – among market participants.
It is already clear that the prospect of an escalated dispute with NATO allies is not going down well.
The dollar has weakened, oil prices have fallen and European stock markets have tumbled in their first reaction.
US markets are closed for the day for a public holiday.
The International Monetary Fund (IMF) – the world’s lender of last resort – has warned of a “major risk” to the global economy if Mr Trump follows through.
Read more:
The misunderstanding that may have triggered Trump’s Greenland threat
How NATO’s collective defence clause works
If enacted, what damage could these tariffs inflict on the UK economy?
The UK has already been paying a 10% rate on most goods since last April as part of the president’s trade war.
That figure is on top of pre-existing tariff rates and other fees.
But some goods, like cars, are subject to no tariffs through later agreements, but a quota system limits the tariff exemptions to set volumes.
The US is the UK’s largest single trading partner but services account for almost two thirds of total exports to America on an annual basis.
These services, such as financial and legal services, are not goods and therefore not subject to tariffs.
Carmakers and pharmaceutical firms are at the top of the tree in terms of exported goods.
Any new tariffs would be damaging to them and wider output at a time when UK growth is already in the doldrums, partly as a result of Trump’s trade taxes to date.
Analysis by Capital Economics on Monday suggested a “worse-case scenario could reduce UK GDP by 0.30-0.75%”, risking recession.
Chief UK economist Paul Dales said: “The long-term political and geopolitical consequences would be much greater. One could be that the UK is nudged closer to the EU, at least when it comes to trade in goods.”
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What about the EU?
The broad US additional tariff rate for EU nations currently stands at 15%.
Exports of goods, such as from the manufacturing engine room of its economy, Germany, dominate its trade with the US.
France, unlike the UK, wants to impose retaliatory tariffs and other measures on the US in the event of trade tariffs being raised by the US president.
The deployment of the EU’s so-called trade bazooka will be discussed at a meeting of leaders later this week but all signs are that the vast majority want a diplomatic solution rather than risk a protracted fight.
