Jaw v war: How Starmer can fight Trump’s tariffs – and not take a beating

The EU has retaliated over US tariffs on steel and aluminium – but should the prime minister follow suit, asks Sean O’Grady

So much for the “special relationship” then. Despite the energetic and earnest pleas of Keir Starmer, our very own “Trump Whisperer”, the US president has slapped 25 per cent tariffs on British steel and aluminium imports.

You might be surprised, given our advanced stage of de-industrialisation, to learn that there are still any such exports – but America, obviously a huge economy, accounts for 5 per cent of UK steel exports and 6 per cent of aluminium exports. British steel exports to the United States are worth over £400m, and the trade body UK Steel which has said the import taxes will be “a devastating blow to our industry".

Donald Trump isn’t bothered about any of that, state visit or not, and so the question is how to respond.

The EU is re-introducing the mostly symbolic schedule of €26 billion retaliatory taxes that were imposed in a similar trade spat in Trump’s first term, targeting such Americana as Harley-Davidson motorbikes, bourbon and jeans. If those fail, then Brussels is threatening to go “full sledgehammer” with a more comprehensive package of measures.

What should Britain do in the face of Trump’s trade aggression? That wise man David Brent once said that the best way to deal with a bully isn’t to stand up to them, as many try, but to make friends with them, which is usually less painful.

In the case of trade, the Brent doctrine has economics on its side. The argument against tariffs – and what Trump is doing, after all – is that all you do when you tax imports is make your own consumers and industries pay more for these foreign goods, which pushes inflation up, reduces competitiveness and lowers living standards. If the Americans substitute UK steel for their home-manufactured alternatives, as Trump imagines, then that has a similar long-term effect, feather-bedding the US sector and making it less competitive on world markets. On the macro level, a trade war impoverishes both sides, reducing all trade and the overall level of output.

The sensible approach therefore is to do nothing and carry on enjoying Harley-Davidson bikes, delicious bourbon and authentic American jeans without making them more costly to British consumers. Why make ourselves worse off? If we imposed extra taxes on American steel and aluminium it would just raise costs for the British firms. Its self-defeating and, as we’ve seen with the Canadian attempts to hit back, invites further action by Trump and more trade chaos.

As ever, everyone loses in a trade war. Besides, we have a broader agenda – keeping America committed to European security and Nato, and getting that backstop security guarantee for Ukraine. The Trump administration likes to link trade policy with defence, security, even national attitudes to "free speech" and the regulation of AI. Antagonising the Americans right now would prejudice UK interests across the board.

Patience and a careful calculation of where the national interest lies is crucial. This is, rightly, what Starmer and his ministers are doing, attempting to make friends with Trump and, in due course, achieve some mutual reductions in barriers to trade in the journey to a genuine US-UK trade deal. This would be hard to achieve, and mean further costs for NHS drugs and loss of market share for British farming. But that’s the reality of trade deals – there will always be winners and losers within a mutually advantageous treaty in overall terms.

Truly fair and free trade is diplomatically arduous and politically painful for all sides, but the economics of it has been clear ever since David Ricardo outlined the principles of comparative advantage some two centuries ago. Trying to be a beacon of free trade in an increasingly protectionist world isn’t quite the same, admittedly, but the focus for our tactics must always be what is best for Britain.

Right now, an escalation of trade hostilities with Trump might make us feel better, but widening the war and having Trump put punitive tariffs on our exports of Range Rovers, Rolls-Royce aero engines and Scotch whisky, to offer some prominent examples, wouldn't do UK plc much good.

With Trump, it’s always better to keep talking.