UK Chancellor reassures parliament and pushes diplomacy after Trump’s tariff shock rattles markets

Chancellor Rachel Reeves moved swiftly on Tuesday to reassure rattled investors as global stock markets began recovering from a brutal sell-off sparked by US President Donald Trump’s surprise announcement of sweeping new trade tariffs.

Speaking in Parliament, Reeves revealed she had been in touch with Bank of England governor Andrew Bailey, who confirmed that “markets are functioning effectively and that our banking system is resilient”. Her intervention aimed to restore confidence as financial centres worldwide tried to absorb the fallout from what Trump dubbed “liberation day”, which ignited fears of a full-blown trade war.

The panic had gripped global exchanges in recent days, but signs of a rebound emerged on Tuesday. Wall Street bounced back strongly after US Treasury Secretary Scott Bessent hinted at diplomatic overtures, saying the US could still strike “some good deals” with trading partners. That shift in tone helped the S&P 500 jump 3.3%, while the Dow Jones rose 3.6%, and the tech-heavy Nasdaq surged 3.7%.

Reeves echoed that cautious optimism, reiterating her longstanding warning that a trade war “is in nobody’s interest”. She told MPs that the UK is working to renegotiate terms with Washington and plans to meet Bessent “shortly”. In the meantime, she has been actively engaging with international allies — including officials in Canada, Australia, Ireland, France, Spain, and the European Commission — to ease global trade tensions and “reduce barriers to trade right across the world”. Talks with Indian counterparts are scheduled for Wednesday.

In Europe, major indices rose in tandem with US markets. London’s FTSE 100 climbed 2%, while Germany’s DAX and France’s CAC gained 1.5% and 1.4% respectively. The Stoxx 600, which tracks European blue-chip stocks, increased 1.7%.

Still, Reeves resisted pressure from the Liberal Democrats to launch a “buy British” campaign in response to the crisis. “People will make their own decisions,” she said, warning against the UK adopting an inward-looking stance just as global diplomacy becomes more essential.

Meanwhile, signs of flexibility from Washington boosted confidence across Asia. Japan’s Nikkei index rebounded 5.6%, and Hong Kong’s Hang Seng climbed 1.6% after enduring its steepest drop since the 1997 Asian financial crisis on Monday. South Korea’s Kospi closed 0.5% higher, while Taiwan’s TWII remained deeply in the red, shedding another 5% after a record-breaking fall, having been walloped by a 32% US tariff on semiconductor exports.

Despite the partial recovery, tensions remain high. China issued a stark warning, declaring it would “fight to the end” if Trump escalates his tariff threats. Beijing has already imposed a 34% reciprocal duty, and Trump has floated additional tariffs of up to 50% unless China backs down. The Chinese commerce ministry branded Washington’s strategy as “going down the wrong path” and pledged “resolute countermeasures”.

The European Commission added it had offered a “zero-for-zero” tariff deal on cars and industrial goods weeks before Trump launched the tariff blitz, with EU trade commissioner Maroš Šefčovič warning Brussels wouldn’t “wait endlessly” for Washington to engage.

Analysts remain cautious. Matt Britzman of Hargreaves Lansdown noted that “this should hardly be seen as the end of the trouble”, as Trump shows no signs of backing away from his aggressive approach to trade imbalances — especially with China.

Still, the possibility of swift bilateral talks between the US and Japan is raising hopes. “The sooner deals are reached, the quicker companies and investors can gain some clarity,” Britzman added.

Amid the uncertainty, oil markets also showed fragility. Brent crude fell to a four-year low of under $64 a barrel on Monday, nudging up just 0.1% on Tuesday. Goldman Sachs warned that, in an extreme scenario involving a global GDP slump and the reversal of OPEC+ production cuts, oil could plunge below $40 per barrel by late 2026.

For now, though, Reeves is positioning herself at the centre of diplomatic efforts to keep the UK plugged into global trade — and out of the worst fallout from the US-led tariff storm.

BBC

The UK government has rejected calls for a “Buy British” campaign in response to Donald Trump’s new tariffs on UK imports. Prime Minister Keir Starmer’s spokesperson said the UK remains an “open-trading nation” and won’t dictate consumer choices. Chancellor Rachel Reeves warned against “inward-looking” trade policies, stressing that escalating barriers would harm inflation and supply chains. Liberal Democrat MP Daisy Cooper had urged the government to back a “Made in Britain” initiative to counter the tariffs and support local producers. While ministers oppose populist consumer campaigns, they are reforming procurement rules to favour British firms in public contracts, particularly in sectors like transport and defence. Starmer said the UK is keeping its options open but prefers negotiation over retaliation. Reeves reassured Parliament that financial markets remain stable and pledged decisive action if needed. The government remains focused on securing a US trade deal and avoiding a trade war that could worsen economic conditions.

SKY NEWS

Chancellor Rachel Reeves will hold crisis talks on Wednesday with top City executives from firms such as Hargreaves Lansdown, Legal & General, Lloyds Banking Group, and M&G to assess the impact of Donald Trump’s tariff escalation. The meeting, revealed by Sky News, comes amid market volatility and growing concerns about the broader economic consequences for the UK. Although most City firms are not directly affected by the tariffs, the talks are intended to shape the Treasury’s strategy for financial services growth and competitiveness. Reeves aims to demonstrate leadership following her earlier Commons statement, reaffirming that the government will act in the national interest and support working people. She will also reiterate her commitment to reducing trade barriers and securing a bilateral deal with the US. The meeting is part of a wider effort by Reeves to boost economic confidence after previous backlash to her budget and spring statement over fears of tax hikes.

THE INDEPENDENT

Half of British adults are now less likely to buy American products following Donald Trump’s sweeping tariffs on UK goods, a new Savanta poll shows. Conducted for the Liberal Democrats, the survey also found that 59% of Britons support a “Buy British” campaign, with backing highest among over-65s. Despite this, both Chancellor Rachel Reeves and Prime Minister Keir Starmer rejected the idea, insisting it would conflict with Britain’s identity as an “open-trading nation.” Reeves warned against “inward-looking” protectionism that could lead to a damaging global trade war. The government instead hopes to support British manufacturers while pursuing a trade deal with the US. Lib Dem Treasury spokesperson Daisy Cooper criticised the government for ignoring public sentiment and urged a national push to support local producers. Meanwhile, Trump said he is not considering pausing tariffs, intensifying market turmoil and complicating UK efforts to negotiate exemptions for British industry.