Reynolds says ‘essential steps' happening ‘at pace' to turn UK-US tariff pact into deal
Lisa O'Carroll
UK trade minister Jonathan Reynolds has said “essential steps” are taking place “at pace” to turn Keir Starmer’s recent tariff pact with Donald Trump into an implementable deal that once entered into force will see 27.5% tariffs on cars and 25% tariffs on steel eliminated.
He was speaking at a brief press conference in Brussels, unveiling 13 new partnerships with third countries to develop critical minerals supplies, including one pact to financially support Tungsten West, a closed mine in Devon.
Reynolds welcomed Trump’s decision last might to British made steel and aluminium from the a doubling to a 50% tariff saying it “reflects the recent breakthroughs” with the US.
But he added:
The two essential steps we are continuing to progress at pace is, first of all, the implementation of the agreement we have on sectoral tariffs. Steel and aluminum is part of that, alongside automotive, aerospace and the other critical sectors.
We’ve had the decision not to extend 50% but we need to bring that 25% down to effectively zero… that is one piece of work which we continue to progress at pace.
Reynolds, who met the US trade representative Jamieson Greer on the sidelines of the OECD summit in Paris yesterday, said the “deeper negotiation about reciprocal tariffs” was “ongoing”.
We don’t want to see additional barriers to trade being put in place, and we continue to work constructively with all partners to secure that.
Key events
Thames Water creditors have submitted turnaround plan
Creditors of Thames Water said they had submitted a turnaround plan, a day after the US private equity group KKR pulled out of a deal to inject fresh equity into the troubled water company, putting its future in doubt and increasing the prospects of a temporary nationalisation.
A spokesperson for the creditor group, which holds more than £13bn of Thames Water’s Class A debt pile, said the “detailed long-term turnaround plan” would “fix the root causes of Thames Water’s problems, restore its balance sheet, rebuild customer trust”.
The plan will break from the patterns of the past by delivering customers’ priorities and improved outcomes for the environment in the shortest possible timeframe. The comprehensive recapitalisation proposal, which is fully-funded and targets a sustainable capital structure, will deliver substantial fresh investment to drive significant change under a new, highly experienced and accountable leadership team.
The creditors include some of the largest investors in UK water companies, as well as UK and global infrastructure more broadly, with a proven track record of long-term stewardship. These investors have the funding and experience required to deliver a transformation of the Company’s performance which marks a departure from past failings, creating a ‘new’ Thames Water that works effectively alongside Government and regulators to deliver for the environment and economic growth.
The creditors believe that Thames Water requires an urgent and fundamental reset and there is a very short and closing window in which a market-led solution can succeed. Discussions with Ofwat and the hovernment will be advanced in the coming weeks to reach an agreement and turnaround for the benefit of customers and the environment.
Reynolds says ‘essential steps' happening ‘at pace' to turn UK-US tariff pact into deal
Lisa O'Carroll
UK trade minister Jonathan Reynolds has said “essential steps” are taking place “at pace” to turn Keir Starmer’s recent tariff pact with Donald Trump into an implementable deal that once entered into force will see 27.5% tariffs on cars and 25% tariffs on steel eliminated.
He was speaking at a brief press conference in Brussels, unveiling 13 new partnerships with third countries to develop critical minerals supplies, including one pact to financially support Tungsten West, a closed mine in Devon.
Reynolds welcomed Trump’s decision last might to British made steel and aluminium from the a doubling to a 50% tariff saying it “reflects the recent breakthroughs” with the US.
But he added:
The two essential steps we are continuing to progress at pace is, first of all, the implementation of the agreement we have on sectoral tariffs. Steel and aluminum is part of that, alongside automotive, aerospace and the other critical sectors.
We’ve had the decision not to extend 50% but we need to bring that 25% down to effectively zero… that is one piece of work which we continue to progress at pace.
Reynolds, who met the US trade representative Jamieson Greer on the sidelines of the OECD summit in Paris yesterday, said the “deeper negotiation about reciprocal tariffs” was “ongoing”.
We don’t want to see additional barriers to trade being put in place, and we continue to work constructively with all partners to secure that.
Rachel Reeves unveils £15bn for trams, trains and buses outside London
Rachel Reeves is announcing £15bn spending on trams, trains and buses outside London as she launches a charm offensive to persuade fractious Labour MPs that her spending review will not be a return to austerity.
The chancellor has begun meeting groups of backbenchers to argue that the money, part of a £113bn investment in capital projects over the rest of the parliament including transport, homes and energy, would only have happened under Labour.
Just three Whitehall departments are still to agree their multi-year budgets with the Treasury before the spending review, the Guardian understands, with the home secretary, Yvette Cooper; the energy secretary, Ed Miliband; and the housing secretary, Angela Rayner, holding out.
The chancellor wants capital spending to be at the centre of the government’s narrative at the conclusion of the review next week in an acknowledgment that MPs, many of them in marginal seats, need a better economic story to address rising discontent among the public.
Eurozone economy grows in May despite sharp drop in German services
The eurozone economy expanded in May but skirted close to stagnation, like the UK, according to the latest PMI surveys.
The composite PMI index, which combines the manufacturing and services indices, fell to 50.2 in May from 50.4 in April, suggesting a slight slowdown in growth. New business intakes fell, extending a period of falling sales that began in June.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said:
The eurozone economy has grown for the fifth month in a row, but this interpretation requires a certain amount of goodwill, as the overall index of 50.2 is only marginally above the expansion threshold and the pace of growth also slowed slightly in May. This development is due to a slight decline in activity in the service sector, while manufacturing output showed the same moderate growth as in the previous month. For the rest of the year, we are confident that further key interest rate cuts by the European Central Bank and fiscal stimulus, particularly from Germany, will be sufficient to offset the negative effects of higher tariffs and increased uncertainty.
The European Central Bank will not be entirely satisfied with the PMI price data. In the services sector, which is closely watched for inflation, the rate of increase in sales prices fell again. However, the situation has worsened somewhat with regard to cost increases, which are already relatively high. This will probably not prevent the ECB from lowering key interest rates again at its meeting on June 5, partly because goods prices have fallen slightly and at an accelerated pace.
Southern Europe is ensuring that the service sector as a whole is spared a slump. Solid growth in this sector in Italy and the weaker but still positive expansion rate in Spain are helping to offset the mild decline in activity in France and the relatively sharp drop in Germany. If the southern European countries can maintain their momentum to some extent, while German service providers begin to benefit from expansionary fiscal policy, a recovery in this sector is quite possible this year. Confidence that this will happen has increased slightly, but is still not particularly strong by historical standards.
EU trade commissioner: Talks with US ‘moving in right direction'
Lisa O'Carroll
News just in from my colleague Lisa O’Carroll in Brussels.
Talks between the EU and the US to strike a tariff deal are moving swiftly, with EU trade commissioner Maroš Šefčovič saying they are “moving in the right direction” following a meeting with US trade representative Jamieson Greer in Paris.
Both sides had previously agreed to intensify talks with a view to finding a breakthrough and path to settle differences by Sunday.
Šefčovič said in a social media post:
We are advancing in the right direction at pace – and staying in close contact to maintain the momentum.
He also described the meeting as “productive and constructive” – this hints at an EU exemption from Donald Trump’s latest tariff decision to double import duties to 50% on steel and aluminium.
Had a productive and constructive discussion with @USTradeRep Ambassador Greer on the margins of the @OECD Trade Ministerial.
We're advancing in the right direction at pace – and staying in close contact to maintain the momentum. pic.twitter.com/Epmb7kejFZ
— Maroš Šefčovič🇪🇺 (@MarosSefcovic) June 4, 2025
UK PMI survey points to steady growth
A monthly snapshot has painted a picture of steady, if unspectacular, growth in the UK.
The composite purchasing managers’ index from S&P Global, which combines the monthly manufacturing and services surveys, rose to 50.3 in May, from 48.5 in April, above the first estimate of 49.4. This means it is above the 50 mark that divides expansion from contraction.
The services PMI increased to 50.9 in May from 49.0 in April, beating the first estimate of 50.2 and signalling faster growth.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said:
UK growth has passed the worst as President Trump walking back his more ruinous tariffs cuts the panic that took hold in April. In late May, when the final PMI survey closed, the seven-day average of economic policy uncertainty measured by the Baker, Bloom and Davis index had fallen by 75% from its April peak and was approaching average levels registered in 2024.
Even after the latest salvo from Mr Trump on steel tariffs—which the UK gained a short reprieve from—policy uncertainty is still down by 60% from its mid-April peak.
Take out the overly large response of business sentiment to uncertainty, as well as smoothing through volatility, and services business sentiment has been steady since October at a level consistent with only slightly below potential GDP growth. The monetary policy committee is far too pessimistic in judging that underlying GDP growth was 0.0% in Q1. The domestic economy is likely expanding steadily, if unspectacularly.
Germany approves €46bn corporate tax relief package
The German stock market has risen, after the country’s cabinet approved a first tax relief package worth €46bn, from 2025 to 2029, to support businesses and revive the sluggish economy.
The government wants to boost investment with measures such as favourable depreciation options for companies, including a ‘super depreciation’ of 30% a year, over three years, to ease the tax burden on business.
The Dax in Frankfurt rose by 0.9% on the news, gaining 216 points to 24,329.
Here’s our full story:
UK Steel urges government to ‘apply rocket boosters' to talks with US
Gareth Stace, director general of UK Steel, has urged the government to “apply rocket boosters” to negotiations to get US tariffs removed from steel imports as soon as possible.
While the UK has been spared from a doubling in US tariffs on steel and aluminium to 50% for now, Britain could still face the higher rate from July if a trade agreement struck between London and Washington does not come into force.
Stace told the BBC’s Radio 4 Today programme:
We need the UK government to apply rocket boosters to those negotiations with the US administration to get that deal over the line and remove tariffs altogether on our imports and exports to the US market, which is our second biggest export market.
He said the last few months and weeks had been a “rollercoaster ride of uncertainty”.
We woke up on Saturday morning to the president saying he’s going to increase tariffs to 50%.
All of the UK steel exporters were in touch with their customers, almost all of them were cancelling those orders or pausing indefinitely.
Now they will have to get back in touch with those customers and say: ‘Are those deals back on or not?’
European shares have risen, despite Donald Trump’s latest trade levies, with Airbus leading gains while traders remain nervous.
Airbus shares rose by 3.4% after Bloomberg News reported that Chinese airlines are considering ordering hundreds of aircraft as soon as next month.
Germany’s Dax rose by 0.7% while the French CAC gained by 0.3% and Italy’s FTSE MiB edged up 0.2%. The FTSE 100 index in London was flat.
The pan-European Stoxx 600 index rose by 0.3% and has rallied about 15% from its lows in early April, after the US president paused sweeping tariffs and struck a trade agreement with the UK (which still has to be finalised).
Heidi Alexander, the UK transport secretary, said the priority of the UK government is to get the trade deal with the US implemented, but did not say when the deal will be finalised.
Speaking on BBC radio 4’s Today programme she said:
We were the first country in the world to do a trade deal with the US which is really good news, and as a result of that it led to the president of the US exempting the UK from that 50% tariff that he is imposing on metals from other countries being imported into the US. What we need to do as a government is get that trade deal implemented and we will be bringing forward the legislation to parliament to ensure that that happens.
My colleague Jonathan Reynolds was in Paris yesterday and he met with his US counterpart to discuss progress with implementing the trade deal that he agreed as is normal with trade deals such as this, you agree the headlines and then you work through the details, that is work that is still ongoing, but of course we need to do the work domestically within the UK to ensure that that trade deal can be implemented.
She added that the government was doing everything it could to help businesses.
I know that business owners will want to know that we are doing absolutely everything that we can to protect them from these very challenging global economic headwinds. We are.”
We have gone through the process of doing the reset with the EU which is going to provide a lot of reassurance to people that are exporting food and drink.
We really shouldn’t underestimate the significance of the three trade deals that have been agreed in the last months, with the US, EU and India.
G7 countries to hold talks on trade today
Lisa O'Carroll
The G7 advanced economies, Britain, Canada, France, Germany, Italy, Japan and the United States, are also due to hold separate talks on trade today.
German economy minister Katherina Reiche said yesterday, on the sidelines of OECD talks in Paris:
We need to come up with negotiated solutions as quickly as possible, because time is running out.
French trade minister Laurent Saint-Martin added:
We have to keep our cool and always show that the introduction of these tariffs is in no one’s interest.
Mexico will request an exemption from the higher tariff, economy minister Marcelo Ebrard said, arguing that it is unfair because the United States exports more steel to Mexico than it imports.
It makes no sense to put a tariff on a product in which you have a surplus.
Mexico is highly vulnerable to Trump’s trade wars because 80% of its exports go to the United States, its main trading partner.
On Tuesday, White House press secretary Karoline Leavitt confirmed the Trump administration sent letters to trading partners to push for offers by Wednesday as a deadline approached.
This underlines Trump’s use of tariffs as a negotiating tool.
Jasper Jolly
Steel companies had been considering whether to turn shipments around in the Mid-Atlantic to try and sell products in Europe, rather than pay 50% tariffs.
There were also questions over whether products immediately shipped back from the US would be liable.
Liam Bates, president for long products at Marcegaglia Stainless Sheffield, said the UK industry was relieved. He said “storm in a teacup springs to mind”.
However, he added that “this is still a wider issue as anything not exclusively UK is attracting 50%” tariffs. It “also does require this 0% deal is now done”.
US trade rep and EU trade commissioner to meet in Paris today
Lisa O'Carroll
Tariffs overshadow an OECD meeting in Paris as world economy ministers gather, with the European Union saying it “strongly regrets” the US decision to double tariffs on steel imports to 50%, a new duty effective as of today.
US trade representative Jamieson Greer and EU trade commissioner Maroš Šefčovič are set to hold talks at 8am BST in Paris, with the bloc seeking to carve out its own deal.
The UK has already been exempted from the increase after a meeting between UK trade secretary Jonathan Reynolds and Greer.
Keir Starmer and Donald Trump agreed a tariff pact with 0% tariffs on steel and autos last month but there are concerns that the deal has not been legalised.
In their talks, Reynolds and Greer discussed a “shared desire to implement” the pact, including agreements on sectoral tariffs, as soon as possible, according to a UK readout.
But Trump’s latest salvo raises temperatures with various partners.
The EU has said it “strongly regrets” Trump’s plan to raise metals tariffs, cautioning that it “undermines ongoing efforts to reach a negotiated solution” with the United States.
Reynolds is in Brussels today to meet EU vice-president Stéphane Séjourné and Ukrainian environment protection minister Svitlana Hrynchuk. Reynolds and Séjourné are due to hold a press conference in Brussels at 11.30am BST.
They are gathering to discuss critical raw materials but Trump’s tariffs are expected to be raised.
Brandauer boss warns of ‘far reaching' uncertainty from tariffs
Uncertainty from tariffs is “quite far reaching” across industry, said Brandauer boss Rowan Crozier speaking on BBC radio 4’s Today programme:
Our customers are less confident in forward planning or ordering what they need. And bear in mind that the types of products we make, whether they’re from steel, copper or brass or some other metal, there are long lead times to our supply chain to actually procure the material, bring it into our factory, stamp the product, finish the product, and then ship it. If there’s delays or late placement of orders – they need the products. That’s not going away.
It does make things a little bit more nightmarish for us to actually plan, so we have to up the ante proactively, talking to our customers to secure those orders in a timely fashion, which gives us just another plate to spin as a manufacturer, and we have plenty.
Asked whether Brandauer’s customers in the United States are having to pay more for its products because of the increase in tariffs, Crozier said:
I think it’s a little bit early to say at the moment, we’ve actively engaged with all six of our customers that are in all corners of the States, they’re very much keen to maintain a working relationship with us, continue to order from us uninterruptedly, but they are still trying to understand what those tariffs actually mean in terms of cost to them.
We’re an advanced manufacturer, so there’s special equipment, there’s special skills, there’s this whole infrastructure that’s required to do what we do, in addition to procuring the right material to do it with. And there’s just not that foundation in the States, and it will take a long time to put that back in, to create that capacity. So there’s little choice for them at the moment, but to continue ordering.
Introduction: UK to be spared 50% steel and aluminium tariffs imposed by Trump on other countries
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
We’ve woken up to news that the UK will, for now, be spared the 50% steel and aluminium tariffs on shipments to the US which come into effect today.
In a statement, Donald Trump, said he had decided to “provide different treatment” to the UK after a trade agreement was struck between Washington and London last month.
Meanwhile, US levies on steel and aluminium imports from other countries are doubling to 50%.
Levies will remain at 25% for imports from Britain but the higher 50% rate could kick in from 9 July if the administration “determines that the United Kingdom has not complied with relevant aspects” of the deal.
The ongoing uncertainty is not good for businesses, said Rowan Crozier, chief executive of the Birmingham-based Brandauer, a metal pressing and stamping specialist that produces millions of parts that are sent around the world.
Talking about the UK’s exemption from the latest tariff hike, he said on BBC radio:
It’s good news because we’re not seeing the same import tariffs as all our competition all over the globe. However, the more damaging element of it is the uncertainty created. And that’s one thing that the Trump administration continues to do, is to create confusion with the hope of getting a deal. I think the government have done well to keep us out of it for now, but there’s a definite deadline that they’ve got to work to now to take away this uncertainty and get those tariffs to zero.
Asian stocks have risen, with South Korea’s Kospi rallying by 2.5% as the election victory of the liberal presidential candidate Lee Jae-myung raised hopes of swift economic stimulus.
Japan’s Nikkei added nearly 1% while the Taiwanese stock market jumped by 2.3% after technology stocks were boosted by US artificial intelligence giant Nvidia. It overtook Microsoft to become the world’s most valuable publicly traded company again yesterday, when its shares rose by 3%.
Stock futures are pointing to a modestly higher open in European markets.
Charu Chanana, chief investment strategist at Saxo in Singapore, told Reuters:
Markets may be desensitised to trade headlines but Trump-Xi talks remain in focus. A grand deal looks unlikely, yet any escalation could still spark a bout of risk aversion.
The Agenda
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9am BST: Eurozone Services and composite PMIs final for May
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9.30am BST: UK Services and composite PMIs final for May
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2.45pm BST: Bank of Canada interest rate decision
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3pm BST: US ISM Services PMI
