Donald Trump could hammer British businesses with bigger US trade tariffs than China after the US president announced plans to punish countries charging VAT on American goods.

UK industry leaders called on the Government to start urgent talks with Washington after being warned they “could be significantly hit” by the move.

Mr Trump signed an order to charge “reciprocal tariffs” on imports from countries charging “a tax” on US goods. The policy highlighted “value-added tax” as an “unfair, discriminatory or extraterritorial tax”, even though VAT is charged on British-made goods as well as imports.

It suggests the UK could face additional tariffs of 20%, the rate of VAT for most products, in addition to existing US tariffs of 3.4%.

The US has imposed additional tariffs of just 10% on China, despite Mr Trump engaging in a war of words with the Asian superpower.

Science Secretary Peter Kyle played down suggestions the UK could retaliate with fees of its own, saying: “We will have a cool, clear look at what’s in the national interest, and we will respond accordingly, based on what we actually have in fact.”

Mr Trump has threatened tariffs on the EU but the UK is trying to persuade him not to impose charges on British exports.

Carmakers, the food and drink industry and the pharmaceutical sector would suffer most if tariffs were introduced, the British Chambers of Commerce warned. But it urged Sir Keir Starmer’s Government to avoid a trade war with the US and said British firms selling services overseas would probably be unaffected.

William Bain, head of trade policy at the British Chambers of Commerce, said: “It is vital that the UK Government does not get sucked into a trade war of tit-for-tat tariffs, which could easily spiral out of control.

“But it must make the most of the time available before the introduction of these tariffs to negotiate with the US on alternative arrangements.”

Paul Dales, chief UK economist at Capital Economics, said: “This adds to our feeling that the economic outlook is more challenging than we previously thought.

“UK export volumes fell 3.2% in the second half of last year and are 7.3% lower than just over two years earlier. The tariff war adds to our concerns that UK exports will remain weak.”

Cabinet minister Pat McFadden said the Government would not “overreact” but “wait and see” whether the tariffs “actually come to pass”.

The Chancellor of the Duchy of Lancaster said: “Sometimes tariffs are announced, a couple of days later, they are unannounced.”

Mr Trump previously announced tariffs on Canada and Mexico, which were suspended for 30 days following negotiations.

The policy published by the White House threatens retaliation not just for tariffs but for other non-tariff barriers and “unfair or harmful acts, policies or practices”.

These include subsidies, “burdensome regulatory requirements” on US businesses and restrictions on animal and plant products, possibly including UK food standards that prevent the import of some US goods such as chlorine-washed chicken.