If you were in any doubt about the disaster of post-Brexit trade deals, Trump’s tariffs should bring you back to reality

Trump has strengthened the case for a customs union with the EU. There is safety in the numbers of a market with 500 million consumers at a time of global turmoil in trade

Andrew Grice
Friday 01 June 2018 16:39
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A trade deal with the US immediately after Brexit now looks very unlikely indeed
A trade deal with the US immediately after Brexit now looks very unlikely indeed

When Theresa May rushed to Washington in January last year, desperate to be the first foreign leader to meet the newly elected Donald Trump, she wanted the much trumpeted special relationship to deliver a special trade deal – potentially, the biggest the UK could land after Brexit.

At the time, it seemed like mission accomplished. Trump promised deeper commercial ties between the two countries, and later a “very big, very powerful” trade deal “very, very quickly”. May allies said this vindicated her strategy of getting close to the president, and offering him an early state visit to the UK.

But wiser heads knew it was at best wishful thinking, at worst a fantasy. May ignored the inconvenient truth that Trump had just won the presidency on an “America first” protectionist trade policy. Why, then, would he put Britain first?

Today May’s hopes lie in tatters. From this morning, Trump has activated a rarely used Cold War presidential power to safeguard national security in order to impose tariffs on steel and aluminium imports from America’s closest allies in Canada, Mexico and the EU. His real target is China, whose overproduction has driven down the global price of steel products, causing job losses in America’s Rust Belt.

But if friends suffer collateral damage, so be it. For Trump, there are no special relationships.

May can hardly be surprised that the president has ignored the pleas from her and other European leaders. After all, he has already spurned them over the Iran nuclear deal, the Paris climate change agreement and his inflammatory decision to move the US embassy in Israel to Jerusalem.

The prospect of a global trade war is very bad timing for the UK and is bound to influence the Brexit debate. It’s another cold shower of reality for Brexiteers who talk up the benefits of the wonderful trade deals the country will magically strike once it has escaped the EU’s grip. The climate could now be very cold indeed, the direction of travel going the wrong way for “Global Britain”.

No wonder Liam Fox, the international trade secretary, is urging the EU not to go in for tit-for-tat measures against Washington, which is precisely what it is likely to do. He would say that, wouldn’t he? Fox’s raison d’etre is already being called into question by May’s plan to extend customs arrangements with the EU beyond the transitional period ending in December 2020, which would limit his ability to strike trade deals around the world. In any case, they would take years, and the UK economy would take a hit in the meantime if it went for a clean break with the EU. It might secure agreements with Australia and New Zealand, but the main prize of America now looks way over the horizon. With Trump in place, it might never happen.

For him, the art of the deal is naked self-interest. In a revealing interview on Radio 4’s Today programme, Anthony Scaramucci, the White House’s former communications director, said Trump would want a “symmetrical” deal that was “population proportionate” and did not allow the UK to maintain protective tariffs on agriculture and parts of its industrial base. It sounded like Trump would be the one demanding special favours: the population of the US is 325 million, the UK’s is 66 million.

Wilbur Ross on trade tariffs: Even if the EU retaliates, it won't be as much as 1% on our economy

Trump’s tariffs on steel also come as the House of Commons prepares to debate the week after next a Lords amendment to the EU (Withdrawal) Bill backing a continuing customs union with the EU. Events should embolden the 20 pro-European Conservative MPs to stick to their guns and join opposition parties in supporting a customs union. Trump has strengthened the case for one; there is safety in the numbers of a market with 500 million consumers at a time of global turmoil in trade.

The Brexiteers will argue that it would be easier for the UK to reach agreement with the US than to wait for a EU-US deal with 28 varying EU interests to accommodate, and which is on hold after the Transatlantic Trade and Investment Partnership hit the buffers. Eurosceptics insist that allowing the EU to continue to negotiate the UK’s trade agreements after Brexit would be even worse than EU membership, since we would have no influence over them. But Brussels has promised Britain consultation on future trade deals the EU would negotiate on the UK’s behalf if it stayed in a customs union.

That looks increasingly like the right course. Privately, May might have reached that conclusion. She wouldn’t call it a customs union, because that would infuriate hardline Brexiteers, but there are welcome signs that Downing Street and the pro-EU Tories are bridging the gap between them.

The Foreign Office’s mantra is to “hug the US close”. Trump’s actions prove that it’s time to rewrite it, and accept that to “hug the EU close” after Brexit is now in the national interest.

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