Fred De Fossard is Head of the British Prosperity Unit at the Legatum Institute.
The result of the US election is already upending politics across the world, and Trump’s second administration doesn’t take office for another two months. In the run up to the election, many were worried about his campaign promise to impose a 10 percent tariff on all goods entering the United States. Yesterday in a social media post he talked of tariffs on Mexico and Canada.
All this has caused panic among the British political class. Total British exports to the USA in the year ending June 2024 were £188 billion, of which £59 billion were goods.
The USA is Britain’s largest trading partner for both goods and services, and the UK enjoys a considerable trade surplus for both. Ordinarily, this would be cause for celebration – the strength of the economic relationship across the Atlantic is one of the great feats of the global economy – but, following Trump’s protectionist turn, that is cause for alarm. A 10 percent tariff on some £60 billion worth of British exports would be incredibly damaging.
The President-elect, however, seems to be throwing Britain a lifeline, and has offered the UK an exemption from these tariffs. This has been reported as offering Britain a chance to make something positive out of Brexit, and an attempt to encourage Britain to move away from the supposedly socialist economics of the European Union.
What does this mean in reality?
Those of us on the free-market right may welcome the opportunity. A free trade agreement with the United States was long vaunted as the primary economic prize of Brexit. It would cement Britain’s already strong economic relationship with the largest and most dynamic country in the world, and it could usher in a wave of new opportunities for regulatory reform in artificial intelligence, data protection, financial services, life sciences and more. Indeed, it would complete the job that British negotiators had tried to do twice before, once with the first Trump Administration, and before that in the 2010s when the UK was the driving force behind the US-EU trade agreement, which failed to materialise.
However, it would not be without controversy. As many commentators have suggested, the UK would be supposedly forced to accept American food on British shelves and agree to American investment in the National Health Service. These are often described as apparently insurmountable obstacles to a US-UK FTA, that would never pass Parliament or the public. In 2017, the Government refused to allow chlorine-washed chicken from America to make its way to British shores.
Scare stories aside – bagged salad in this country is washed in chlorine before going on sale, and many millions of British tourists visit the United States and eat American chicken every year – these hurdles will be politically tricky to vault, and advocates of a trade deal should make clear that they can win the public over.
Sadly, there are still many barriers to this deal domestically, and the noises coming out of the Government this week suggest these barriers are only getting higher.
After spending the summer trying to engage with Donald Trump and his allies, since the US election the Government seems to be changing course. The Business Secretary has suggested that if the USA embarked on a trade war with China, it would side with Europe, and presumably pivot towards China. The Prime Minister has redoubled attempts to engage with continental allies, recently meeting Emmanuel Macron, and the Government has briefed that it is already “war-gaming” its response to Trump’s tariff policy, which could include retaliatory tariffs.
This might reflect personal and political discomfort with the expected approach taken by Trump and his team next year. Indeed, one Trump adviser explicitly said that a US-UK FTA would be a chance for Britain to pivot away from the socialist economics of the EU. That poses understandable problems for the Labour Party.
Frustratingly, it posed an insurmountable problem for the Conservatives while they were in office as well.
One of the reasons they failed to complete a trade agreement with the USA was that America was not willing to make stringent commitments on climate change. This has been echoed by trade negotiators from Australia and New Zealand who were baffled by Britain’s insistence on agreeing Net Zero targets in agreements ostensibly focused on cutting tariffs and increasing trade. This looks only to get worse with Ed Miliband running energy and climate policy, who has apparently been hindering trade deals with the Gulf States – serious economic and security allies of the UK – for similar reasons.
Despite significant economic problems at home, Britain sits in an enviable position in terms of global trade. It enjoys the most comprehensive FTA with the EU that it has ever signed, it is joining CPTPP next month, and is already benefiting from trade deals with our Anglosphere cousins Australia and New Zealand. Security treaties like AUKUS ensure the UK sits at the heart of the western alliance, and Britain should encourage the expansion of aspects of this treaty to allies like Canada and potentially Japan.
The Government should think about how to complement this arrangement, rather than undermining it. Reattaching Britain to the EU – whose own leaders admit is failing economically and politically – in the interests of reducing frictions for a small part of our total trade would be an error.
Instead, the Government should look across the Atlantic with an open mind, and advance British interests with our American allies. British growth and prosperity may depend on it.
Fred De Fossard is Head of the British Prosperity Unit at the Legatum Institute.
The result of the US election is already upending politics across the world, and Trump’s second administration doesn’t take office for another two months. In the run up to the election, many were worried about his campaign promise to impose a 10 percent tariff on all goods entering the United States. Yesterday in a social media post he talked of tariffs on Mexico and Canada.
All this has caused panic among the British political class. Total British exports to the USA in the year ending June 2024 were £188 billion, of which £59 billion were goods.
The USA is Britain’s largest trading partner for both goods and services, and the UK enjoys a considerable trade surplus for both. Ordinarily, this would be cause for celebration – the strength of the economic relationship across the Atlantic is one of the great feats of the global economy – but, following Trump’s protectionist turn, that is cause for alarm. A 10 percent tariff on some £60 billion worth of British exports would be incredibly damaging.
The President-elect, however, seems to be throwing Britain a lifeline, and has offered the UK an exemption from these tariffs. This has been reported as offering Britain a chance to make something positive out of Brexit, and an attempt to encourage Britain to move away from the supposedly socialist economics of the European Union.
What does this mean in reality?
Those of us on the free-market right may welcome the opportunity. A free trade agreement with the United States was long vaunted as the primary economic prize of Brexit. It would cement Britain’s already strong economic relationship with the largest and most dynamic country in the world, and it could usher in a wave of new opportunities for regulatory reform in artificial intelligence, data protection, financial services, life sciences and more. Indeed, it would complete the job that British negotiators had tried to do twice before, once with the first Trump Administration, and before that in the 2010s when the UK was the driving force behind the US-EU trade agreement, which failed to materialise.
However, it would not be without controversy. As many commentators have suggested, the UK would be supposedly forced to accept American food on British shelves and agree to American investment in the National Health Service. These are often described as apparently insurmountable obstacles to a US-UK FTA, that would never pass Parliament or the public. In 2017, the Government refused to allow chlorine-washed chicken from America to make its way to British shores.
Scare stories aside – bagged salad in this country is washed in chlorine before going on sale, and many millions of British tourists visit the United States and eat American chicken every year – these hurdles will be politically tricky to vault, and advocates of a trade deal should make clear that they can win the public over.
Sadly, there are still many barriers to this deal domestically, and the noises coming out of the Government this week suggest these barriers are only getting higher.
After spending the summer trying to engage with Donald Trump and his allies, since the US election the Government seems to be changing course. The Business Secretary has suggested that if the USA embarked on a trade war with China, it would side with Europe, and presumably pivot towards China. The Prime Minister has redoubled attempts to engage with continental allies, recently meeting Emmanuel Macron, and the Government has briefed that it is already “war-gaming” its response to Trump’s tariff policy, which could include retaliatory tariffs.
This might reflect personal and political discomfort with the expected approach taken by Trump and his team next year. Indeed, one Trump adviser explicitly said that a US-UK FTA would be a chance for Britain to pivot away from the socialist economics of the EU. That poses understandable problems for the Labour Party.
Frustratingly, it posed an insurmountable problem for the Conservatives while they were in office as well.
One of the reasons they failed to complete a trade agreement with the USA was that America was not willing to make stringent commitments on climate change. This has been echoed by trade negotiators from Australia and New Zealand who were baffled by Britain’s insistence on agreeing Net Zero targets in agreements ostensibly focused on cutting tariffs and increasing trade. This looks only to get worse with Ed Miliband running energy and climate policy, who has apparently been hindering trade deals with the Gulf States – serious economic and security allies of the UK – for similar reasons.
Despite significant economic problems at home, Britain sits in an enviable position in terms of global trade. It enjoys the most comprehensive FTA with the EU that it has ever signed, it is joining CPTPP next month, and is already benefiting from trade deals with our Anglosphere cousins Australia and New Zealand. Security treaties like AUKUS ensure the UK sits at the heart of the western alliance, and Britain should encourage the expansion of aspects of this treaty to allies like Canada and potentially Japan.
The Government should think about how to complement this arrangement, rather than undermining it. Reattaching Britain to the EU – whose own leaders admit is failing economically and politically – in the interests of reducing frictions for a small part of our total trade would be an error.
Instead, the Government should look across the Atlantic with an open mind, and advance British interests with our American allies. British growth and prosperity may depend on it.