Pressure mounts on Chancellor Rachel Reeves to deliver US-UK trade deal

Almost a year on from Labour’s landslide election victory in the general election, Chancellor Rachel Reeves continues to face the thankless task of navigating the country’s finances through an increasingly turbulent geopolitical landscape. Attending the spring meetings of the International Monetary Fund (IMF) in Washington DC this week, and ahead of her meeting with the US Treasury Secretary, Reeves maintained that she was in ‘no rush’ to get a UK-US trade deal done, and that any agreement reached must be ‘in the British national interest’. 

Despite efforts to cool tempers back home, there is huge pressure on the Chancellor to secure a trade deal. And quickly too.  

Figures from the Office for National Statistics (ONS) this week revealed that borrowing in the financial year ending in March was £151.9bn; £14.6bn above forecasts from the Office for Budget Responsibility (OBR) just a month ago. 

Economists have thus warned that Reeves could be forced to put up taxes or introduce further cuts to public spending in the next budget, if she wants to stick to her self-imposed fiscal rules. Ruth Gregory, deputy chief UK economist at Capital Economics, said the borrowing overshoot ‘even before the influence from the tariff chaos is felt’ raised the chances of ‘more tax hikes.’ 

Amid these warnings, still sharp in political memory is the Chancellor’s decision- just last month- to slash welfare spending and restore her fiscal headroom, despite much backlash from her own party and paving the way for a potential rebellion when the measures come to a vote in Parliament next month.  

Nonetheless, Reeves is determined to stick by her centrepiece policy to not borrow for day-to-day spending and to reduce national debt. Reluctant to raise taxes too, she has already given assurance that the election pledges not to raise income tax, national insurance for employees or VAT, are strict non-negotiables. But with the present economic outlook, she will be hard-pressed for an answer on just how she can simultaneously keep borrowing down, without raising taxes.  

As a poor economic outlook prompts political pressure like a moth to a flame, the Chancellor is fighting hard to ward off criticism. Shadow Chancellor Mel Stride called the borrowing figures ‘alarming, but not surprising’, adding that they ‘lay bare the price the British people are paying for Rachel Reeves' choices. The Chancellor also continues to come under pressure from within her own party to relax the fiscal rules, with Blue Labour this week calling for a rethink from the Chancellor in order to deliver the type of widespread investment and redistribution that many in the party want to see.  

So, with President Donald Trump’s 90-day pause in the implementation of US tariffs coming to an end in early July, Reeves’ cool exterior is surely just that.  

The IMF has warned that with Donald Trump’s tariffs of at least 10 per cent, the UK would top the charts in the West with the highest inflation, at 3.1 per cent. Meanwhile, the growth forecast for 2025 was downgraded from 1.6 per cent to 1.1 per cent. 

In the latest news from across the Atlantic, there are suggestions that the UK could reduce tariffs from 10 per cent to 2.5 per cent on US vehicles and parts. If so, this would be the second concession on the table from the UK, after reports that the government is also willing to ditch its planned digital services tax to secure the deal.  

Vice- President JD Vance is keen to extract a further concession, as he urges the government to renege on its legislation regarding online safety laws. Just how much of her political agenda Reeves is willing to forgo to get the economy back on the straight and narrow is, as yet, uncertain.  

Speaking at the World Economy Summit, Reeves said that the US president was ‘keen to do a deal with the UK, reflecting the closeness of that relationship’. With precious little reassurance from the President himself, Reeves can only hope her positive words radiate through the White House.