Rachel Reeves has given up hoping for a trade deal with Donald Trump

The White House has divided countries into three groups – and Britain is not in the top priority category for a UK-US agreement, writes John Rentoul. It’s a huge blow to the chancellor’s attempt to get her growth plans for Britain back on track

When Rachel Reeves went to Washington last week, she was full of hope that she would come back with a US trade deal in her pocket. “She wouldn’t be making such a big trip of it, and taking a pack of journalists with her, if she didn’t think an agreement was on the cards,” one seasoned observer of transatlantic traffic told me.

The chancellor was there, notionally, for the annual spring meeting of the International Monetary Fund (IMF), but the real business was a meeting with Scott Bessent, the US treasury secretary.

Before that meeting on Friday, however, Reeves gave an interview to the BBC in which she gave away rather more than she intended when she said: “I understand why there’s so much focus on our trading relationship with the US but actually our trading relationship with Europe is arguably even more important, because they’re our nearest neighbours and trading partners.”

At one level, this was a factual statement, that – before the Trump tariffs, at least – Britain did more than twice as much trade with the EU than the US. But it sounded as if she was trying to put a brave face on her failure to secure a deal.

She presumably already knew, before she read it in The Wall Street Journal on Friday morning, that the Trump administration had split its trade talks with 17 countries into three groups – and the UK was not in the first priority group.

Yesterday, a source told The Guardian: “The government has been told it will not be in phase one – though that leaves the door open to be in either phase two or three.”

In other words, Donald Trump is just not that into the UK. He is more interested in Asian economies, with South Korea top of the list. Despite JD Vance, the vice-president, saying two weeks ago, “The president really loves the United Kingdom”, it turns out that he is so indifferent to us that we cannot even be sure that we are in the second circle of the Sun King’s favour.

When the chancellor returned to London without a piece of paper in her hand, government sources still held out the faint hope that a US deal could still be done before the EU-UK summit at Lancaster House on 19 May.

That seems unlikely, and I now get the impression that Reeves has given up hoping for any agreement at all. The mood in government seems to be that they are resigned to waiting and seeing. As far as they are concerned, a limited deal has been agreed and is waiting for Trump’s approval, and they don’t know why it has not yet been forthcoming.

This is a blow to Reeves’s attempt to get her growth plans back on track. Persuading the US administration not to impose all the tariffs that Trump has announced would at least help to restore some of the losses, even if it would not add to prospects for growth.

Again, Reeves inadvertently spoke the truth when she said at the start of her Washington trip a week ago: “This isn’t just about damage limitation.” In other words, it was about damage limitation. And so far, it hasn’t limited any of it.

To make matters worse, it is not as if the Lancaster House summit will produce compensatory gains in our (more important) trade with the EU. The summit has been trumpeted as a major event in Keir Starmer’s “reset” of relations with the EU, but a new trade deal is not expected to be signed until the end of the year at the earliest.

All that will happen at the EU-UK summit will be the publication of a communique setting out the heads of agreement for that deal – with the details to be negotiated at the level of officials. This may even involve, at some stage, a Brexit-style “tunnel” when all communication with the outside world is shut off.

So Reeves remains some distance adrift of where she was a month ago when at the spring statement on 26 March she only just kept within her fiscal rules by making a couple of last-moment unspecified cuts to the welfare budget.

Since then, Trump’s trade war has depressed the outlook for the world economy, while new figures show that government borrowing was already running at a higher level than expected.

Now that she realises that a US-UK trade deal is a second or third-order priority for Trump, she must know that her chances of avoiding more big tax rises in the autumn Budget are one step closer to zero.