Donald Trump has claimed that Sir Keir Starmer “was very happy” the UK was only hit with 10% tariffs. The President’s announcement that all countries would now be subject to between 10% and 50% when selling goods to the world’s biggest economy saw an immediate backlash, with the US dollar slumping nearly 2%.

Ministers have insisted they will remain “cool and calm” as they seek to secure an economic deal to mitigate the damage to Britain, but are not ruling out the possibility of retaliatory levies on a range of American products.

Mr Trump said: “We have a very good dialogue. I think he was very happy about how we treated them with tariffs,” the US president told reporters on Air Force One.

Mr Trump added that he was open to negotiations on the tariffs if countries offered “something that is so phenomenal”.

Speaking at the launch of his local government campaign in Chesterfield on Thursday, Sir Keir said that the world was at the beginning of a “new economic era” in which “we have to act and lead differently” – describing the response to Mr Trump’s tariffs as “not just a short-term tactical exercise”.

The prime minister said: “It is the beginning of a new era, we need to understand that, just as we have for defence and security, we have to understand the changing world when it comes to trade and the economy.”

Asked whether it was time for the UK to stand up to Mr Trump, Foreign Secretary David Lammy told reporters following a meeting with Nato counterparts in Brussels: “The United Kingdom, like France, is a great maritime nation.

“We are a nation that believes in open trade, and I regret the return to protectionism in the United States, something that we’ve not seen for nearly a century.

“As you know, we are consulting with business and industry. At this time, we are engaged in discussions with the United States to strike an economic agreement and an economic deal.

“And of course, we have been absolutely clear that all options are on the table as we ensure the national interests of the British people, who will be very concerned at this time about how this affects the bottom line for them and their economic welfare.

“We will put their national interest first, and it’s in their national interests to be negotiating with the United States an economic agreement at this time, but keeping all options on the table.”

French President Emmanuel Macron has gone further than the UK in criticising Mr Trump’s decision, denouncing it as “brutal and unfounded” decision after 20% tariffs were hiked on the EU.

The US President’s announcement on Wednesday sent stock markets tumbling across the globe, with the Prime Minister warning it marks the beginning of a “new era” in world trade.

London’s FTSE 100 index of companies declined further after the City’s financial markets opened on Friday morning, by 0.53%, or around 45 points, to 8,429.98 points immediately after the start of trading.

An “indicative list” published by the UK Government on Thursday showed products that could be targeted as part of retaliatory action, including bourbon whiskey, motorcycles, guitars and jeans.

But an immediate response is unlikely as Trade Secretary Jonathan Reynolds told MPs he would hold a four-week consultation on counter-measures.

The Government still hopes for an “economic deal” with the US to secure some exemption from the tariffs, with Prime Minister Sir Keir Starmer promising businesses on Thursday that he would “fight for the best deal for Britain”.

But even with a deal, the global impact of Wednesday’s tariffs is expected to cause a significant economic shock to the UK.

Experts predicted that UK economic growth – already expected to amount to just 1% this year – could be up to 0.5 percentage points lower than expected over coming years as a result of the tariffs.

Thomas Pugh, economist at RSM UK, said he believed the tariffs would be “not far off” wiping out Chancellor Rachel Reeves’s fiscal headroom by the time she announces her second budget in the autumn.

Last week, the Office for Budget Responsibility warned that Ms Reeves’s headroom against her debt target would be at serious risk if tariffs were imposed.

If this proves to be correct, the Chancellor will face the prospect of imposing more spending cuts or tax rises if she does not change her fiscal rules.