Starmer is right to duck the US/EU tariff war

But even though it might endanger recent positivity about a Brexit reset, Starmer has a strong case for biding his time. For a start, Trump is a loose cannon who can change his mind overnight. 

He slapped huge tariffs on Canada and Mexico, only to suspend them for a month when they offered some fig-leaf measures on border security, most of which seemed to have been already in place. Trump loves anything he can sell as a triumph, whether the facts justify his claims or not.

So these steel tariffs may not last long – in fact, they might not survive von der Leyen’s upcoming meeting with vice-president JD Vance. And if they do, it is therefore perfectly possible that the UK might be able to get an exemption or at least an amelioration of them – unlike the EU, we run a trade deficit with the USA in goods and Starmer pointing this out to the president might be enough to change his mind.

The prime minister knows that what the British steel industry is really worried about is not an added 25% on its exports to America, but that Trump’s tariffs could lead to the dumping of cheap steel in the UK from other countries which can no longer sell in America; we could deal with that problem with our own tariffs designed to stop such dumping, which wouldn’t affect the US at all.

Starmer will also be mindful that retaliation often escalates. We have a relatively small steel and aluminium industry these days and the USA is not a huge market for us; we export far more to the EU. If we go all out to try to save our metals industry by placing tariffs on USA exports to us, America is likely to put even more tariffs on our other products. 

For instance, the last time Trump put tariffs on our steel industry we, as part of the EU at the time, put tariffs on American whiskey, among other things. Now we are outside of the huge EU economy, if we were to put tariffs on American whiskey then the obvious retaliation would be Trump slapping his own on Scotch whisky. We export an awful lot of Scotch to the States. We are not going to win that fight.

Finally, the economic advice, which I wrote about a few weeks ago, is that we lose more by retaliating than we gain by just turning the other cheek. America is not a large importer of our goods but loves our services industries. Since they are not hit by tariffs, we should just encourage them and ignore Trump. Meanwhile our largest market is the EU and we are supposed to be trying to improve trade with it at the moment.

So, Starmer’s cautious approach now looks like the right way forward – and there is a case for turning the other cheek even if Trump hits our steel with tariffs too. The problem will come if the EU responds by introducing tariffs on American steel and aluminium. 

It will insist that if we want to export our steel and aluminium to Europe, we must prove that it really was made in the UK and are not American imports which are using the UK as a backdoor into the single market. It may also take a dim view of British finished goods that use American metals.

And there’s the wider issue of antagonising our much larger neighbours, with whom we do at least three times more trade as we do with the US, just when we are trying to persuade them to ease Brexit rules on red tape.

Not being directly allied with either Trump or von der Leyen might give us some room for manoeuvre, but really very little. We are desperately trying to keep both sides happy with very little power or influence of our own – an island that has now permanently situated itself between a rock and a hard place.