‘Deepening ties with EU best way for UK to deal with Trump tariff fears’

President Trump was re-elected in November with a commitment to increase tariffs on all goods entering the US. That has set off some often-panicked stories in the UK media about the likely economic damage of our single largest trading partner doing this.

Any suggestions of the UK being one of the largest victims of Trump’s trade policy are wrong. For a while we exported £59 billion of goods in the last 12 months for which figures are published, the figure for services was £129 billion. More importantly, Trump’s dislike is particularly for countries having a trade surplus with the US, not the case for the UK.   

Of course, there will be pressures on particular exports or relationships the UK has. For at heart, Trump’s ideology is nakedly America first. He does not see trade – or indeed life – as being of mutual benefit, but of winners and losers.

By contrast, if Labour has a trade philosophy, it is derived from internationalism and the idea that trade is welcome when fair, mutually beneficial, and subject to internationally agreed rules. Such principles should not be abandoned as a response to even a US President, not least one who will change his mind, frequently.

Trump doesn’t honour his own words or deals

Trump’s stated plans are for a 10 to 20% tariff on all goods entering the US, and up to 60% on those coming from China. Yet since November he has been threatening Canada and Mexico with higher tariffs unless they fix particular border issues.

This proves his plans aren’t fixed and he won’t respect the deals he did in his first term – which were with Canada, Mexico, and China. Almost certainly, he won’t carry out in full any of what has been said to date, not least because taxing imports will cost US companies and consumers more.

READ MORE: ‘Trump’s victory is a warning to Britain and Europe – fix inequality or populists will win’

Suggestions therefore that the UK must negotiate a traditional free trade agreement with the US to avoid tariffs are not correct. First, because we don’t know what tariffs there may be, and second because any deal wouldn’t offer that protection.

Neither are the broader economic benefits of a UK-US trade deal particularly significant, not least when set against the known issues of changing food standards – the infamous chlorinated chicken – that even the Conservatives wouldn’t try to sell. Only those who always dreamed of Brexit as an opportunity to get closer to the US should see a UK-US trade deal as the answer right now.

Surviving America First

US international economic policy changed when Trump was first elected in 2016. While sometimes cloaked in progressive language denouncing the notional concept of ‘hyper-globalisation’, this has been fundamentally saying they shouldn’t have to follow global trade rules.

For the UK, the rest of Europe, and other US allies that rely upon trade for prosperity, this is a problem. Even more so when our security is so much bound up with NATO and US protection.

While talking about China as the main threat, US economic actions have often been indiscriminate in their targets. Any commitment to rewriting rules for the 21st century is shallow at best.

There isn’t a particularly good handling strategy for this beyond survival. Not least when so many US pronouncements in the next four years will come in the form of late-night social media posts and briefings from those around the President of more or less influence. Talk of digital trade deals or joint activity towards China might be a distraction for a while, but won’t change any big pictures.

Most UK trade will continue regardless, whether that is Rolls-Royce engines, pharmaceuticals, or business services. This is today’s real global economy, where it is companies that trade, facilitated or hindered by government actions.

US companies in the UK prioritise the EU relationship

Trump’s trade proposals will almost certainly in effect be weakened by fears that widespread tariffs will lead to US stock market falls. That many of those around Trump such as Elon Musk are full-blooded believers in global trade may also be a factor. Bad things will happen, what they are is unpredictable.

Those US companies who are based in the UK have a clear message for the government here. They actively want to see the UK-EU relationship strengthened. Trade is global but often arranged regionally, and many in the US see the UK as the entry point to Europe, particularly for services.

Both Rachel Reeves and Jonathan Reynolds have spoken after Trump’s re-election of a UK commitment to trade globally, but with the large nearby market as the priority. That message is right and has been well-understood globally, but if anything needs strengthening.

READ MORE: ‘Could a second Trump presidency actually be good for Starmer?’

There continue to be fears that Labour will be too timid in the face of domestic pushback from old Brexiteers strengthened by some anti-EU folk around President Trump. Seeking greater trade with China without damaging US ties will also be a challenge.

Our US and EU relations

This all just shows the need to move on from 2016. Both will remain important international economic and security partners, but right now the overwhelming UK interest is in deepening trade ties with the neighbourhood as against rather uncertain prospects in a market with rather erratic approaches to international partners.

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