2 weeks Ago By Bilal Abbas
“It could have been a lot, lot worse,” said a Labour MP over a drink in Westminster on Wednesday night as it emerged that the UK was getting the lowest – 10 per cent – rate of Donald Trump’s “liberation day” tariffs. The US President was even more upbeat about Britain’s position – telling reporters on Air Force One that the Prime Minister was “very happy about how we treated them with tariffs”.That “happiness” has its limits.
While ministers believe that they managed to avoid a worst-case scenario, any tariff is a problem, particularly when the Chancellor Rachel Reeves has little fiscal headroom and a restive party. “It’s just more bad news every week,” said a member of the Government.The UK’s preferred tactic is to pursue a mini-trade deal that could lead to the complete removal of tariffs.
This is the focus of the continuing negotiations between London and Washington.if(window.adverts) { window.
adverts.addToArray({"pos": "inread-hb-ros-inews"}); }It is an approach that is favoured by Team Trump. The President’s son, Eric, took to social media to warn world leaders not to be “the last country that tries to negotiate a trade deal with Trump” because the “first to negotiate will win”.
However, there are concerns that those larger countries slapped with bigger import taxes may jump the queue when it comes to the prioritisation of talks.Technology policy is viewed as key in terms of what the UK is willing to offer, which means there could be concessions on the digital services tax or the Online Safety Act. Both are the bugbears of American tech giants.
Rachel Reeves delivers her Spring Statement in the Commons. The Chancellor may have to make uncomfortable choices in her Autumn Budget (Photo: House of Commons/Reuters)With the new tariffs coming into effect this weekend, the rollercoaster hasn’t even left the platform. Some in Labour hope that when it does it could be a short ride – that warnings of a recession and a potential consumer backlash could force Trump to change course.
After all, since “liberation day”, the US is up there among the countries feeling the most heat, with financial markets on Wall Street suffering their worst day since 2020.But Government figures are preparing for global uncertainty to be the new normal.if(window.
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adverts) { window.adverts.addToArray({"pos": "mpu_tablet_l1"}); }First off – as Eric Trump alluded to – the President’s tactics appear to be partly aimed at forcing the world to kiss the ring.
Where the Conservative government talked about free trade deals through Brexit, Trump has set the scene for months of negotiations with world leaders and their teams traipsing to his court to try to agree a deal under which the tariffs will be slashed in return for concessions.Second, there is a political argument that the Trump administration is making: forget what the globalists told you about the changing world, which meant the factories closed in your town, there is a way to fix this because tariffs will boost US manufacturing.As with all things “Make America Great Again”, the aim is not to unite (these tariffs will polarise debate in the US) but the hope is that they will rally the base.
‘Across Europe there is growing disdain for the White House administration’Some on the Labour side – specifically Blue Labour and the union movement – are even sympathetic to some of Trump’s moves. “I know I’m not meant to say it,” says one Labour newbie of the American protectionism. “But Trump’s not all wrong on this.
”But the net result is a headache for Reeves. Labour MPs are already unhappy about welfare cuts and the Spring Statement. The worry in the Treasury is that even if it managed to get the 10 per cent tariff lifted, the bigger hit could be the overall effect on the global economy – and there’s no easy fix to that.
This week, Sir Keir Starmer talked of a “new economic era”. But the fear is that it could look a lot like the old one: with spending cuts and tax rises.Reeves may have to make uncomfortable choices in her Autumn Budget.
“There is very little left to cut. They can’t do welfare again,” says a member of Labour’s 2024 intake. Tax rises are viewed as more palatable by many of Starmer’s MPs.
But could there be another option, one that plays better to the Labour base? if(window.adverts) { window.adverts.
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addToArray({"pos": "mpu_tablet_l2"}); }Across Europe there is growing disdain for the White House administration. Even with a deal, MPs worry that Trump is so mercurial he could come back for more concessions or change tack.Ministers have long insisted that they do not need to pick between Europe and the US.
If anything, the UK was better treated on tariffs because of it being outside the EU.Yet an argument is starting to be advanced in Labour circles: if Trump is an unreliable ally, surely the need for a wider European reset has grown? For now the line is that the UK has a special position. But ministers are already looking at strengthening ties on the Continent, given that Reeves needs any economic boost she can get.
#color-context-related-article-3612837 {--inews-color-primary: #3759B7;--inews-color-secondary: #EFF2FA;--inews-color-tertiary: #3759B7;} Read Next square KATY BALLS Trump could offer us a way out of a trade war – but it’ll come at a priceRead MoreWhile the official policy is not to rejoin the customs union, there could be something that looks like a customs union but has a different name. Most Labour MPs could live with some form of customs union – and believe this is not as risky with voters as concessions on immigration.Worries about immigration mean that even the most pro-Europe ministers admit that rejoining the single market is not a viable option anytime soon.
“The question is, if we take a hit from tariffs, could that be fixed by being closer to the EU?” asks a Labour figure.When it comes to Starmer’s inner circle, hugging Europe too close would probably face resistance from the likes of his chief of staff, Morgan McSweeney, who had to fight to chart a path to power for Labour after it lost voters over Brexit. But the party is broadly pro-European.
If chaos reigns, the Europe question will loom large again..
