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Fri, 29 May 2020

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WATCH: Philip Hammond warns US-China trade war would be 'very dangerous' for UK economy

WATCH: Philip Hammond warns US-China trade war would be 'very dangerous' for UK economy
3 min read

A trade war between the US and China would be "very dangerous" for the UK economy, Phillip Hammond has said.

The Chancellor admitted growing tensions between the world's two largest economies had already had a negative effect on global growth forecasts.

The warning came hours after the United States hiked import taxes from 10% to 25% on £150bn-worth of Chinese goods including internet modems, car parts and vaccum cleaners, after trade negotiations collapsed.

China has yet to respond to the rise, which came into force overnight, but had previously warned it would use "counter-measures" if the US committed to the move.

Speaking as new figures showed the UK economy grew by 0.5% in the first quarter of 2019, Mr Hammond told Sky News: "We have already seen a negative effect on forecasts of global growth, largely because of trade tensions between China and the US, so this is a worry.

"We were hoping we were moving towards a solution of this long-running dispute. So it is disappinting to see what looks like a setback in that process, but I am optimistic that in the end there will be a deal between the China and the US.

"That is very important for us in the UK, because our economy is a very open economy so it is exposed to what is happening elsewhere in the world."

He added: "Obviously if there was a full-blown trade war between the world's two largest economies, that would be very serious indeed for growth prospects across the world as a whole, that could be very dangerous. But I am optimistic we won't get to that."

His comments come ahead of President Trump's three-day state visit to the UK in June, where he will hold official talks with Mrs May and attend a state banquet at Buckingham Palace.

The controversial commander-in-chief gave Beijing only a week's warning of the impending tarriff change after US officials accused them of scuppering trade talks.

Mr Trump added there was now "absolutely no rush" to conclude any trade deal, tweeting: "We will continue to negotiate with China in the hopes that they do not again try to redo deal!"

But No10 expressed concern over the US action, urging both sides to avoid "further escalation".

“We are concerned about it and we are clear that nobody benefits from trade wars,” said the PM’s spokeswoman. 

“The discussions between the two are ongoing and we hope they will find a solution to avoid any further escalation.”

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