When the US President was warmly greeted by Keir Starmer at Scotland’s Turnberry golf course last July and a glittering state visit in September, a precarious US-UK tariff deal was heralded as a breakthrough. The UK would have a baseline 10 per cent tariff rate.
For all the hoopla about that result, it was a drag on Britain’s trade outlook coming on top of duties already in place before the US import tax surge last spring.
But in a world of shrinking options, it was a good sight better than the 15 per cent one imposed by Donald Trump in the EU-US agreement, and vindication of Starmer’s strategy of seeking trade deals using post-Brexit freedoms while attempting to heal divisions with Europe.
After an annus horribilis for the Government, reality has been disobliging on both fronts. The problem with Trump’s tariff pledges towards the UK is that they are written in disappearing ink. And once again, the page is bare. When Trump added that the UK was very well protected on tariffs – “because I like them” – the less reassuring implication was that if the President decided that he has gone off the UK, we would be back to where we started.
Two factors have caused the big chill. The first is the Supreme Court’s ruling which has just struck down his right to impose swingeing trade levies by using emergency powers, without securing congressional approval.
Despite a pro-Trump majority, the court has now rebuked the President’s fast and loose approach to where presidential powers begin and end. For a leader who is both mercurial and increasingly willful however, being thwarted in that domain has simply pushed him towards the threat of using “great alternatives” under other parts of the US’s sprawling trade legislation. He is also determined to do so, before the domestic squalls of the midterm elections in November take over the agenda.
In reality, the “trade deal” with the US was more of a promissory note. And we know what happens to those in the Trump era. The short version for UK businesses is that the costs of exporting goods to the US are likely to end up substantially higher than they were.
It reveals that the “deal” was never as special as it was made out to be – bilateral agreements are prone to being unpicked whenever the President has the tariff equivalent of a bad hair day. Right now, Trump is especially angry with the UK agreeing a costly long lease on the Chagos Islands with Mauritius. Once again, Trump, who initially welcomed the deal, applied the disappearing ink pen: an agreement the CIA and State Department were broadly OK with has now incurred the President’s ire.
But as a weakened Starmer struggles with the backwash of that stand-off, it means he is in no position to beg for special treatment in Washington on major trade items, from steel to classic cars.
We will hear a more restrained description of trade policy towards America, evidenced on Sunday in Bridget Phillipson’s summary of 15 per cent tariffs as merely “the best deal possible” for the UK. And that is a skinny proposition.
The sober truth, however, is that tariffs may even rise from the present baseline. Even the upcoming state visit of King Charles, slated for April, is a dicier-looking prospect than it was. Inevitably, it will be overshadowed by potential legal action against Andrew Mountbatten-Windsor, assuming it goes ahead on time in the circumstances.
Putting aside the drama and the damaging uncertainty, the UK is not in such a bad place on overall trade with the US (£202bn in exports in the last recorded year to last September and £126.7bn in imports). The US also accounts for the biggest slice of UK trade – over 17 per cent, because services are outside the present squeeze. But the on-off levies for goods exporters makes this a dependency that feels lopsided. Many companies now want to pivot to trade with the EU in larger volumes.
The problem with that, however, is that, as I noted watching Starmer speak about defence and procurement deals with Europe at the Munich Security Conference last weekend, the cheers from the Eurozone tend to come most when the UK is outlining that it is “not the Britain of the Brexit years” and that it wishes for closer relations – with much less enthusiasm on spending more time on dealing with trade frictions with Britain.
Now Peter Kyle, the Business Secretary and Nick Thomas-Symonds, the Europe minister, have to fight off a new “Made in Europe” protectionist scheme to prioritise internal trading in the EU being pushed by Emmanuel Macron. “It is taking up a huge amount of our time,” admits one senior figure involved. “But it could do immense damage to the attempt to bring us closer to Europe.” Even if Germany and Italy share the UK’s opposition, the project is on the table at the upcoming EU Council meeting, which takes up time and bandwidth in Brussels.
In truth, we can’t blame Starmer for seeking a berth between a Trump rock and an EU hard place, with some modest successes in an India trade deal he can more rightly claim was a success. But the lesson of the past year is that like much else in the transatlantic alliance, things are more likely to change than remain stable. If it is any comfort, the EU has also discovered that the promises of vast deals to take energy exports and EU investment are not coming good either. For the same reason: they were always designed for instant salesmanship by a man in the White House who is, to put it politely, a salesman and less politely, a huckster who believes that consistency is for wimps. And on this side of the “pond”, that means that a deal is all too often no durable deal at all.
Anne McElvoy is executive editor at POLITICO and co-host of Politics at Sam and Anne’s podcast
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