Donald Trump’s latest plan to slap tariffs on US imports based on sales taxes in their country of origin could shave £16 billion ($20 billion) off UK economic output over the next two years, in what would be a blow to Prime Minister Keir Starmer’s promise to fire up growth.

The surprise inclusion of VAT to calculate tariffs prompts questions over the possible impact on British businesses.

Donald Trump’s latest tariff proposal could see UK exports hit with higher trade taxes, as VAT is included in tariff calculations. Analysts warn of potential 20% levies on British goods, impacting key sectors like cars,

European Union trade ministers will hold an unscheduled video conference on Wednesday to discuss the bloc's response to impending U.S. steel and aluminium tariffs, EU diplomats said on Tuesday. U.S. President Donald Trump signed proclamations late on Monday to raise tariffs on all steel and aluminium imports to 25% without exceptions or exemptions.

Britain can cuddle Europe and the US at the same time, a minister has said, as Donald Trump’s steel tariffs threaten to spark a global trade war. Cabinet Office minister Nick Thomas-Symonds denied that the UK would have to choose between aligning itself more closely with the EU or the US with tensions between the two mounting.

The European Union said it would respond with "firm and proportionate countermeasures" after U.S. President Donald Trump's decision to impose tariffs on all steel and aluminium imports, escalating fears of a trade war.