Sir Keir Starmer has rejected suggestions he will have to hike taxes or slash spending because of Donald Trump’s tariff blitz. The Prime Minister’s comments on Wednesday came as China heaped 84% tariffs on the US, ramped up from a previous 34%, in retaliation for Trump’s 104% levies on the nation.

When it was put to him that he would have to increase taxes or cut spending, Sir Keir said: “I reject that argument. Liz Truss tried the experiment of putting to one side rules and institutions, checks and balances, and it had a huge impact on working people across the country when she crashed the economy. We are not going to allow that to happen for working people.

“That's why the fiscal rules were put in the first place. It's why they're ironclad, why they're non-negotiable, because that platform of stability is what gives us the chance for investment into this country, huge investment I've been able to announce today in relation to the Bedford theme park, billions of pounds that only comes because we created the conditions of stability and the fiscal rules are part of that.”

Sir Keir told ITV’s Peston: “The fiscal rules were put in for a purpose, they’re ironclad, they’re non-negotiable.”

He added: “They’re not going to change, we’re acting in the national interest.

“Those fiscal rules are foundational to the stability that we brought to our economy, so we go ahead in that calm way.”

The Starmer government set out new fiscal rules in October 2024, at Rachel Reeves’ first budget as Chancellor, which prevent borrowing to fund day-to-day spending.

The Chancellor attempted to offer reassurances to the City on Wednesday when stocks continued to slide following Mr Trump’s imposition of sweeping tariffs.

Yields on long-dated government bonds surged to their highest point since 1998 as investors anticipated faster interest rate cuts from the Bank of England (BoE), raising the cost of government borrowing.

It came as the import taxes announced by the US president last week came into effect, including a 10% levy on all goods from the UK along with a 25% charge on cars and other taxes on steel and aluminium.

Doing a trade deal with the US or changing the rates of American tariffs will not be “enough”, Sir Keir said, insisting the world has changed and the UK needed to act differently.

Asked by ITV’s Peston if the 10% tariff on importing goods to America would be in place forever, the Prime Minister replied: “Look, I don’t know.

“We are negotiating and we hope to improve the situation, but what I mean by this is that simply thinking that any change in the rates, or any deal is going to be enough, to my mind is wrong, because just as we’ve done with defence and security, where we’ve recognised it’s a changing world, we’ve got to step up and act differently.

“In that case with defence spend, co-ordinating better across Europe, so too with trade and the economy.

“We are actually, there’s a changing world, we’re entering a new era. We have to think and behave in a way that reflects that, and that’s why we’ve turbocharged what we’re doing on the economy.”

Following the imposition of the tariffs, and the new 104% levy on some Chinese imports, the FTSE 100 fell again on Wednesday, wiping out most of the previous day’s gains.

The BoE itself warned on Wednesday that risks to the stability of the world financial system had increased because of the imposition of US tariffs but added that UK households and businesses remained resilient.

US Treasury secretary Scott Bessent spent Wednesday trying to calm financial market nerves while blasting China's tariff play as a "loser" move.

He told Fox News that the retaliation was “unfortunate” and would make them lose out.

"It's unfortunate that the Chinese don't want to come and negotiate… hey have the most imbalanced economy in the history of the modern world, and I can tell you that this escalation is a loser for them,” he said.