Rachel Reeves has hit back at Donald Trump after he confirmed plans to slap 25% tariffs on all cars imported to the United States.

The chancellor warned the president that imposing import taxes on British products “would be bad for the US as well”.

Trump’s announcement came just hours after the government’s own financial watchdog warned such a move would damage economic growth in the UK and wipe out the chancellor’s spare cash.

British officials are currently holding intense negotiations with their US counterparts in a bid to strike an “economic deal” which could exempt the UK from any American tariffs.

Appearing on BBC Breakfast this morning, Reeves said American tariffs on British goods would be bad for the US too.

She said: “I recognise it’s a very important time, especially for those who do export to the US – whether it’s cars or steel or so many other goods and services.

“Our economies are so closely intertwined. There are a million British people working for American firms and a million Americans working for British firms.

“An escalation of tariffs would be bad for the UK, but it would be bad for the US as well, and that’s why we are working intensely these next few days to try and secure a good deal for Britain.”

In a later interview on Radio 4′s Today programme, Reeves also hinted that the government could withdraw financial support for Elon Musk’s car firm Tesla if tariffs are imposed on UK vehicles.

Presenter Nick Robinson said: “The British government gives a lot of money to Tesla at the moment. Elon Musk’s company got £200 million in grants since 2016.

“If these tariffs go ahead are you prepared to say ‘we’ll put a tariff on Elon Musk then, we’re not going to subsidise his cars any more’.”

Reeves replied: “We don’t want to get into a trade war, but we are looking at the zero emission vehicle mandate, which is why that money goes to Tesla and looking at how we can better support the car manufacturing industry in the UK.”