UK-US TRADE TALKS ON HOLD AMID CHAGOS ROW
The US has signalled that trade talks with Britain are on hold as it accused Sir Keir Starmer of “letting us down” over the Chagos Islands.
Scott Bessent, the US treasury secretary, said no more trade talks were scheduled between the two countries as relations hit a new low in the wake of Donald Trump’s reignited tariff war.
Mr Bessent warned of “glitches” in the trade deal between the US and the UK, and criticised Sir Keir’s decision to hand the Chagos Islands over to Mauritius.
The Prime Minister signed a deal last May to give the Chagos Islands to Mauritius, saying it was the only way to protect a UK-US military base on Diego Garcia – one of the islands – from the influence of countries such as China.
Speaking at the World Economic Forum in Davos on Wednesday, Mr Bessent said: “President Trump has made it clear that we will not outsource our national security or our hemispheric security to any other countries.
“Our partner in the UK is letting us down with the base on Diego Garcia, which we’ve shared together for many, many years, and they want to turn it over to Mauritius.”
Britain will now be forced to rent back Diego Garcia at a cost of more than £30bn over the next 99 years, after Mauritius said it wanted a closer relationship with Beijing.
President Trump criticised Britain’s Chagos Islands deal as an “act of stupidity” on Tuesday. He also cited the move as a reason why America should take control of Greenland.
The president has threatened to impose a fresh round of tariffs on goods sold into the US from Britain and other key Nato allies in retaliation for their refusal to support his bid to seize Greenland from Denmark.
While the UK and US announced a trade deal last May, details are still being worked out. Britain was the first nation in the world to agree a trade deal with the Trump administration after the so-called “liberation day” tariffs last year.
This included a baseline tariff of 10pc, hailed as a victory compared with the 15pc facing goods from the EU, while steel and aluminium imports from Britain are taxed at 25pc compared with 50pc charged on the same products from most other nations.
But progress on a fuller free-trade deal has remained elusive. The steel industry hopes that providing supply chain security reassurances to the US could see the 25pc tariff dropped further, but talks have proven slow.
Mr Bessent said: “I think that we are continuing to negotiate. There have been some glitches in the trade deal, but I am sure the Starmer Government will push forward.”
Reeves: ‘No shortage of dialogue’ with US
Rachel Reeves played down tensions between the UK and the US after Mr Bessent’s comments on Wednesday.
The Chancellor insisted the two sides were in regular contact and defended Labour’s Chagos deal, as she claimed that Mr Trump had been “very positive” about the deal at the time.
“We worked last year to get a trade deal and as the US commerce secretary Howard Lutnick said when I saw him yesterday, he doesn’t see any reason why that trade deal should be undone,” she said in an interview with Sky News in Davos.
The Chancellor cautioned that “people shouldn’t get ahead of themselves” on the economic impact of threatened tariffs, insisting there is “no shortage of dialogue” with the Trump administration. Ms Reeves added that she was in regular contact with Mr Bessent on WhatsApp.
A separate “tech prosperity deal” between the US and Britain was suspended by Washington in December because of frustration at Britain’s failure to bring down trade barriers.
Mr Trump said countries opposing his scheme to take Greenland will face tariffs of 10pc on goods from the start of February, rising to 25pc if they have still not acquiesced by June.
It represents a particular danger to Britain’s car industry, which exports around £10bn of vehicles to the US each year.
Under last year’s trade deal, the tariff on the first 100,000 UK-made cars was cut from 25pc to 10pc. However, levies could now rise once more, undermining the competitiveness of those vehicles in the American market.
Ms Reeves said she remained confident that Britain would build on its relationship with the world’s biggest economy.
She said: “Last year, through a lot of hard work and diplomacy, we secured the first and the best trade deal with the with the US, and we saw with Jaguar Land Rover and others, the huge benefit that brought to British businesses and the people who work for them.
“We will continue to work to get the best deal for the UK.”
2026-01-21T11:15:44Z