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31 May 2018

Donald Trump’s tariffs on the UK expose the Brexiteers’ trade fantasies

The belief that an “America First” protectionist would privilege Britain was always delusional.

By George Eaton

When Donald Trump was elected US President in 2016, many Brexiteers rejoiced. Here, they thought, was a man who would spare the UK from the chill of isolation.

Even at the time, this was plainly wishful thinking. “America First” meant Britain second (at very best). Trump’s protectionist rhetoric has now been matched by action. The US has announced that new tariffs will be imposed on steel (25 per cent) and aluminium (10 per cent) imports from the EU (including Britain), Canada and Mexico.

Theresa May’s government is left to feebly protest that it is “deeply disappointed” (in the words of a No 10 spokesman), Liam Fox, the Trade Secretary, and the cabinet’s most devout Atlanticist (who previously described the move as “absurd), has learned that his friendship counts for little.

Trump’s actions will strengthen those MPs pushing for Britain to remain part of an EU customs union. A global trade war, to put it mildly, is not the best time to sever relations with your closest partner.

The likes of Fox and Boris Johnson have long argued that exit from the customs union would herald the birth of a freewheeling, buccaneering “global Britain”. Rather than being shackled to Brussels, the UK would be liberated to strike valuable trade deals with China, India and “the Anglosphere” (the US, Canada, Australia and New Zealand).

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The ideological and sentimental appeal of this project to Conservatives is obvious. But the economic appeal is not. As Robert Chote, the head of the Office for Budget Responsibility, emphasised when I interviewed him earlier this year, “most of the work that trade economists have done” suggests that “the reduction in openness likely with the EU [the destination of 44 per cent of British exports] is likely to outweigh any increase elsewhere.” Indeed, the government’s own analysis suggests that the UK would lose between 2 per cent and 8 per cent of GDP over 15 years from a “hard Brexit” (withdrawal from the single market and the customs union), while new deals with the US and others would add no more than 0.6 per cent. 

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And an agreement with Trump’s America would be far from painless. Though he struggles to progress beyond platitudes, the US President has declared that he wants an “all-in” trade deal, including agriculture and services. He has complained that the “protectionist” EU hinders US farmers, seemingly unaware that any deal with Britain faces the same obstacles.

The prospect of chlorine-washed chicken entering the UK has already split the cabinet (with Environment Secretary Michael Gove vowing to block it) and hormone-injected beef and acid-washed pork would likely fare no better. Were Britain to adopt US standards, it would undermine continued trade with the EU: there is no cost-free option.

That furore is minor, however, compared to the rows that would result if the US demands protections for its multinationals and access to the NHS. Britain’s inexperience of trade negotiations (the preserve of Europe for 44 years) and its large trade surplus with the US mean it starts from a position of unambiguous weakness.

Even if Trump is determined to strike a deal, he faces political constraints of his own. New trade deals require Congressional approval and legislators must be given extensive notice at each stage of the process. Successful trade agreements require patience, attention to detail and persistence – qualities in which Trump is notably lacking.

Until the UK leaves the EU, it cannot commence formal negotiations with the US, a restriction that would likely persist during a lengthy transition period. By that time, Trump may well have left the White House (or simply lost interest).

In trade, geography matters more than history. The UK’s economic future depends far more on the agreement it reaches with Europe than that it may never strike with the US.