6 days Ago By Will Hazell
The UK and the EU will not coordinate joint retaliation if Donald Trump launches sweeping tariffs , sources have told i . British and European sources said that the UK and the EU were unlikely to formally work together to respond to US tariffs now that Britain is outside the bloc. During the presidential election campaign, Trump floated the idea of tariffs of 10 per cent or 20 per cent on all imports, as well as higher tariffs of 60 per cent or even 100 per cent on countries such as China and Mexico.
The threat has left America’s trade partners scrambling to work out how to respond. The EU is one of America’s largest trading partners, with oil, gas and pharmaceuticals traded between them the most. Before Brexit, the UK would have taken a joint stance as a member of the EU’s Customs Union.
However, now that Britain is outside the EU, Sir Keir Starmer will be faced with a decision about whether to coordinate with the bloc or forge his own path. One EU source told i that the UK would likely try to cut its own deal with Trump. “They will hedge – they’re already doing it,” they said.
The source also said that the EU ultimately did not need to coordinate with Starmer because the bloc already has the “critical mass” to hurt America with retaliatory tariffs without Britain’s involvement. They added that preparatory work on what the EU could do to retaliate is under way. A European diplomat agreed that the UK could try to go it alone on trade, although they said they were “sceptical” that Britain would be spared US tariffs because of this.
How important is the US for EU trade? According to the European Commission, the United States is the third-largest exporter in the world, behind China, which is the biggest, followed by the EU. However, the US is the biggest importer of goods globally, followed by the EU and then China. The European bloc exports more to the US than anywhere else, while the US is the EU’s second-largest import partner.
What would US tariffs mean for the EU? It is this trade deficit illustrated above – America being a net importer, rather than exporter of goods – that has motivated Donald Trump to threaten to slap tariffs on all goods imported into the country. Such a move would obviously hurt the EU’s economy, although it would be felt more severely by some countries than others. Germany, Italy and Ireland, for instance, would suffer the effects of tariffs most acutely as they are the biggest exporters of goods to the US in the EU.
But the US economy would also take a hit, as any tariffs would be reciprocal, starting a trade war between two of the three largest global economies. What about the UK’s trade relationship with the US? The US is the UK’s largest trading partner and biggest export market, meaning any tariffs on goods will hit the UK’s economy hard. The fact the US has around a $20bn (£15bn) trade surplus with the UK could mean it is spared from the Trump levies.
But few would be willing to second guess the incoming President. What impact would tariffs have on the UK economy? Economists have warned that should the US hit the UK with the same tariffs as other countries, then inflation could jump back up to around 5 per cent. This may also have an impact on the Bank of England’s decision on interest rates, meaning borrowing costs could stay higher for longer.
They also said that if Starmer tried to strike a free trade agreement with the US it could prevent Britain agreeing a veterinary deal with the EU as part of Labour’s desired European “reset”. Another foreign diplomat said that the UK might play a role as an “honest broker” between the EU and the US. They said that the EU may itself struggle to agree a united position on how to deal with US tariffs, with the likes of Hungarian leader Viktor Orbán and potentially Italian Prime Minister Giorgia Meloni wanting to adopt a more emollient approach to Trump.
These splits would make it “difficult” for Brussels to ask Starmer to stick close to it, they said. A UK Government source hinted that Britain would try to chart its own course, pointing out that Britain now has more freedom to design a trade policy which could achieve different things in different markets. They acknowledged that there would be “trade-offs”, with an agreement in one area often having knock-on effects on the types of deals possible with other countries.
But they said they thought the UK could be “agile” enough to find “sweet spots” in areas which would not come into conflict with one another. Other influential British voices have also advised against unquestioningly lining up behind the EU on trade. Lord Mandelson – believed to be the front-runner for Britain’s next ambassador to the US – said that the UK should seek “the best of both worlds” from America and Europe.
“We have got to find a way to have our cake and eat it,” he said last week. Lord Kerr – a former UK ambassador to Washington DC – told i last month that not being “bound by retaliatory EU tariffs” could be a “Brexit benefit”. “A Macron-led tariff hike on the Americans in retaliation for their beastliness is not something which we would necessarily follow,” he said.
Read Next How the Trump presidency could affect your visa - and UK expats in the US While the UK and EU might take contrasting approaches on trade, European sources said Trump’s return would prompt much closer foreign policy, defence and security cooperation between Britain and Europe. For example, the UK would work in lockstep with European allies on areas such as the de-escalation of tensions in the Middle East, trying to keep the US engaged in Nato and making the case for continued support for Ukraine. This could involve the UK and European allies making a collective offer to America to increase defence spending, one diplomat said.
i also understands that EU countries will try to talk Trump down from punishing tariffs by arguing that it will weaken Europe economically, limiting their ability to meet the US’s demand to increase military spending. A Department for Business and Trade spokesperson said: “We look forward to working closely with President Trump to improve UK-US trading relations to support businesses on both sides of the Atlantic.”.
