It will take Starmer’s greatest skill to deal with Trump’s ‘Liberation Day’ – but victory is possible

Further US-UK discussions will be needed before the dust settles from Trump’s tariffs announcement, writes Andrew Grice – and that gives Keir Starmer an opportunity to deploy some ‘calm and pragmatic’ diplomacy

When Donald Trump confirms that he is imposing tariffs on imports from the UK, it will appear to be a huge setback for Keir Starmer. Yet, the prime minister can still turn a diplomatic defeat into a victory.

Until recent days, Starmer had high hopes of freeing the UK from the worst effects of Trump’s “Liberation Day”. A hastily struck US-UK “economic prosperity deal”, based on advanced technology and services, was ready to go and would have given the UK a carve-out from most Trump tariffs, UK officials told me.

It would have been a coup for Starmer. Instead, his softly-softly strategy on Trump will now be called into question – both at home, where he will be accused of not standing up to the US president, and abroad, where natural allies like the EU and Canada will urge the UK to join their retaliation against the US.

The opportunist Liberal Democrats will strike a chord with many voters by accusing Labour of “bowing down” to Trump, “while slashing support for disabled people and frontline public services to the bone” instead of collaborating with our EU allies. The Tories do not support retaliation but are bound to accuse Starmer’s negotiating strategy of failing.

At some points during the hasty negotiations, US officials hinted they were happy with the outline deal on the table. But the only view that mattered was Trump’s, and even his closest advisers didn’t know which way he would jump.

As ever, events are more about Trump’s vanity than the eventual outcome. This is surely why he didn’t sign off on the UK agreement. “He wanted his ‘shock and awe’ moment,” one Whitehall source told me, referring to the blanket global tariff Trump threatened during his election campaign. Despite the damage tariffs will inflict on the American economy, he wants to show other countries who is king of the world and watch them come begging for a deal.

‘Starmer’s proposed trade deal would not insulate the UK from the global hurricane of an all-out trade war’ (PA)

Starmer won’t retaliate immediately, regardless of criticism. He will say that while all options (including retaliation) are in play, negotiations with the Trump administration will continue in the hope the tariffs on the UK will be lifted. Some, such as those on the steel industry, may remain. The government has plans for higher tariffs when imports of certain products reach a certain level to stop countries like China from dumping goods on the UK in a global trade war. Indeed, Starmer’s proposed trade deal would not insulate the UK from the global hurricane of an all-out trade war. It could reduce UK GDP by 1 per cent and eliminate Rachel Reeves’s headroom against her fiscal rules just days after her spring statement. It wouldn’t be the chancellor’s fault, but having already revamped her first Budget after five months, it would be a crushing blow.

Controversially, UK ministers are ready to dilute the digital services tax to spare the US tech giants, arguing that the overall impact on the domestic economy is what matters. The tax will be recast, with the net widened to other countries and smaller firms to preserve the Treasury’s £800m of revenue.

Under the agreement, AI regulation would be lighter. UK tariffs on American fish and seafood might be reduced, and those on beef scrapped. The latter would anger British farmers already alienated by the “tax on family farms”. But Starmer will not allow the US’s chlorinated chicken and hormone-fed beef. That is rightly a red line for him.

Starmer told his cabinet yesterday that the national interest was best served by “a calm and pragmatic approach” rather than “a knee-jerk reaction”. All very well, but he will have to hold his nerve, especially if Trump makes him sweat for a trade deal for weeks or months. Public pressure to hit back would grow. Seven out of 10 Britons already want the government to retaliate if the US imposes tariffs, according to YouGov.

Some Labour MPs fear privately that Starmer will look like a pushover and want him to toughen his language; they argue that Trump respects strength and they look enviously at the approach of Mark Carney, Canada’s new prime minister. But, unlike Starmer, he has an election to fight, and Trump holds the whip hand over the UK: if it retaliates, that would scupper – at least in the short term – a trade deal that is tantalisingly close.

For now, I think there’s no alternative to hugging Trump close, even at the risk of being crushed. The Trump Show that the entire world will be watching tonight is only the first act – not the end of the performance. When the final reviews are in, the UK will likely be in a much better place than the EU. It might finish high up the international league table.

Ministers hope a US trade deal can be struck within weeks. But they admit privately that no one knows what will happen. “This is Trumpworld,” one senior figure involved in the talks said ruefully. It is also Trump’s world – which is precisely what the megalomaniac president wants.