Theresa May will arrive in Washington to find that Donald Trump has changed the 'special relationship' entirely

The UK, like everyone else, will have a transaction-based relationship with the US. We are at the front of the queue, which is good. But if we want something, such as the trade and migration deal with the US, then we have to offer something in return

May might be in for a shock when she meets President Trump this Friday (Sky)

So the wall is to be built. Actually there is a wall already across the most populated parts of the Mexico frontier, leaving the desert to create a barrier elsewhere. Sadly, several hundred people die attempting the crossing each year, and if an extended wall discourages people from trying to cross, it may paradoxically save lives.

The wall is just one element in the frenzied flurry of trade and migration activity coming out of the White House in the past few days. There has been the end of US participation in the Trans-Pacific Partnership trade deal, the threat to renegotiate NAFTA, the growl against China, the restriction of people coming from parts of the Middle East, and hints of a trade deal with the UK. Indeed there is so much going on that it is hard to make any sort of sensible judgement as to what is substance and what is just noise.

The financial markets seem to have decided on balance that what is happening will be good for business, with the Dow at last pushing through 20000. But I suspect that has more to do with the forthcoming fiscal boost than the impact of his trade policies. (Sterling, incidentally, is at a six-week high, probably thanks to the CBI reporting that factory order books were at their strongest since 2015). Trade takes place with or without trade deals: it just performs better when barriers are not erected to slow it down.

Still, a couple of things have become clear. One is the new President does see things as a series of deals, and the rest of the world has to get used to that. Nothing is traded for free. So we have to be careful to be clear in our negotiations with this new administration about what we want and what we can offer. The UK, like everyone else, will have a transaction-based relationship with the US. We are at the front of the queue, which is good. But if we want something specific, such as the trade and migration deal with the US, then we have to offer something in return. I am pretty sure the Foreign Office gets this. I assume the Prime Minister understands it too. (If she doesn’t, then she will by Friday evening, US time).

Transactional relationships have the benefit of clarity but they are not for the squeamish. So Canada will have a reasonably easy time on the trade front: imports from and exports to the US are in rough balance. Mexico will struggle a bit, for it exports quite a lot more to the US than it imports from it: $271bn versus $212bn to end-November last year.

China has a problem. I have been looking at data from Statista which shows that, to November last year, it exported $423bn of goods to the US but imported only $104bn. That is a huge gap and you can see why there is resentment in the States about it – a resentment that to some extent mirrors the similar discrepancy that the UK has in goods trade with the rest of the EU. Germany and Japan should worry too, for they both sell a lot more to the US than they import from it.

In theory, bi-lateral trade imbalances should not matter: it all evens out in the end. Balances of payments have to balance and simple mathematics tells us that a current account deficit or surplus has to be offset by a capital account surplus or deficit. But when trade imbalances become huge and visible – as they are in the case of China, and as a result China is able not only to destroy US jobs but also to buy up American companies – well, there is a problem.

It is not a new problem. In the 1980s, Japan built up massive trade surpluses with the rest of the world. It was forced, by the Plaza Accord in 1985, to accept a sharp rise in the value of the yen and a corresponding decline in the dollar. That made Japanese exports less competitive, and encouraged the Japanese car manufacturers to build plants in America. I expect that some sort of accord will be reached with Mexico on trade, because the numbers are not too far apart. But China is another matter. Somewhere in there lies a deal, but it may be a deal that the Chinese don’t like.

Is a transactional US better or worse for the world economy? It worries people like me, but I really don’t think we have any idea. We can, however, glimpse the way the world is going when President Trump is leading.