LONDON (Reuters) - British finance minister Philip Hammond said on Friday he was hopeful the United States and China would step back from a potential trade war that risked causing very serious damage to Britain and the world economy.
The United States increased tariffs on $200 billion worth of Chinese imports on Thursday while the two countries were in the midst of last-ditch talks to rescue a trade deal, a development Hammond described as “disappointing”.
“A full-blown trade war would have a very serious dampening effect on the whole global economy, including the UK, but I think we’re a way away from that and I hope this will be resolved,” Hammond told broadcaster Sky News.
“It is disappointing to see what looks like a setback in that process, but I’m optimistic that in the end there will be a deal between China and the U.S. That’s very important for us,” he added.
While British exports to China are relatively small, the United States is Britain’s largest trade partner after the European Union, and its open economy is heavily exposed to global downturns.
A spokeswoman for Prime Minister Theresa May told reporters earlier on Friday that Britain was concerned by the U.S. decision to raise tariffs on imports from China to 25%.
“Nobody benefits from trade wars,” the spokeswoman said.
Britain recorded its biggest-ever trade deficit in goods and services during the first three months of 2019, according to official figures released earlier on Friday, dragging on first-quarter economic growth.
This appeared to reflect businesses sucking in imports ahead of Britain’s planned departure from the European Union on March 29, though there was also a surge in gold imports, which are typically volatile from month to month.
Hammond said he believed the economy was still on track to meet official forecasts of 1.2% economic growth this year.
Reporting by David Milliken and Kate Holton; editing by Michael Holden