Debate in Parliament was brought to an unexpected halt this morning as Speaker Sir Lindsay Hoyle interrupted proceedings so that Chancellor Rachel Reeves could make an emergency statement on Donald Trump's tariffs and the state of the economy. Ms Reeves had been due to answer questions from MPs. But the normal question and answer session was delayed for the Chancellor to make a statement, with Conservative and Liberal Democrat politicians then invited to make comments of their own.

Ms Reeves revealed that she spoke to Andrew Bailey the Governor of the Bank of England this morning. She said: "This is an anxious time for families who are worried about the cost of living. We have your backs. And British businesses who are worried about what a changing world will mean for them. We have your backs too."

Ms Reeves said she would be meeting US Treasury Secretary Scott Bessent "shortly". She said the UK welcomed the fact that the US had imposed only a 10% tariff on most UK products, which is lower than the tariffs imposed on many other countries, but said that the priority was to convince the US to cut the tariffs of 25% on products such as cars.

She told MPs: "This Government is clear-eyed that our response to global change cannot be to watch and wait, but instead to act decisively – to take the right decisions that are in our national interest, protect working people."

She made it clear the Government would not allow borrowing to soar up, saying: "All of the decisions that we make as a Government will be underpinned by the stability of our non-negotiable fiscal rules."

Ms Reeves said: "We have been clear. Nothing is off the table," in an apparent threat that the UK could impose retaliatory trade tariffs of its own.

But she also said: "A trade war is in nobody’s interest. It is why we must remain pragmatic, cool headed, and pursue the best deal with the United States that is in our national interest."

Ms Reeves told MPs: "It is why we will continue to back British businesses in thiese uncertain times, particularly those most affected, as we rebuild our industrial base."

And she said the Uk was working with allies such as Canada, Australia, Ireland, France, Spain and the EU as a whole to reduce trade barriers.

"Tomorrow I will hold talks with the Indian government," she said. Chancellor Rachel Reeves told MPs: “The United States’ decision to impose tariffs has had and will continue to have huge implications for the world economy.

“These implications have been reflected in the reaction that we’ve seen in global markets in recent days, which the financial authorities have of course been monitoring closely. This morning I spoke to the governor of the Bank of England, who has confirmed that markets are functioning effectively and that our banking system is resilient.”

London’s FTSE 100 has risen in the first few minutes of trading on Tuesday, as a sense of optimism returned to the financial markets after several days of heavy losses. The index, which tracks the UK’s top 100 listed companies, was up more than 1% shortly after markets opened on Tuesday.

All other indexes on the London Stock Exchange were also in the green. It follows a more positive session for Asian markets, with some indexes making gains after suffering from steep falls in previous days.