Keir Starmer has declared that the UK “reserves the right to respond” to Donald Trump’s global tariff trade war. The US President will slap a 25% import tax on cars, on top of a series of reciprocal tariffs set to come into effect on April 2.

Sir Keir’s reluctance to hit back with the threat of reciprocal tariffs is driven by fears of the economic harm a trade war would cause.

The Prime Minister said his Government was involved in ongoing discussions with the White House aimed at “mitigating the impact” of any levies but that ultimately “our national interest has to come first”.

Asked whether the UK reserves the right to respond to tariffs during a visit to Yorkshire, he said: “Yes, of course. Obviously, any tariffs are concerning and we’re working hard with the industries and sectors likely to be impacted.

“None of them want to see a trade war, which is why we’re engaged in discussions with the United States about mitigating the impact of tariffs.

“Now, that’s what we’re working hard on, but in answer to your question, yes – in the end, our national interest has to come first, which means all options are on the table.”

The US is the second largest export market after the European Union for cars built in the UK.

Some 16.9% of UK car exports were to the US last year, representing a total of more than 101,000 units worth £7.6 billion.

In its assessment of the UK economy, the budget watchdog warned a full-blown tariff war with the US could wipe 1% off gross domestic product next year and derail Chancellor Rachel Reeves’s hopes of balancing the books, forcing her to implement more cuts or tax hikes.

That “worst-case scenario” would come about if Mr Trump imposed 20% tariffs on British goods and the UK reciprocated in kind.

Shares in UK luxury carmaker Aston Martin dropped sharply when stock markets opened on Thursday morning.

Jaguar Land Rover could be one of the UK vehicle manufacturers most affected by tariffs.

Its latest annual report shows 22% of its sales were to North America in the year to the end of March 2024.

Mike Hawes, chief executive of industry body the Society of Motor Manufacturers and Traders, said the announcement of tariffs was “not surprising but, nevertheless, disappointing” and he urged both governments to strike a deal that avoids further damage.

Talks on a deal with the US continue “at every level” before the expected imposition of further tariffs next week, Downing Street has said.