
I do not envy Rachel Reeves or any other senior UK government figure tasked with negotiating our
future trade deals.
Economic growth is the centrepiece of the government’s manifesto and Reeves sees the People’s
Republic of China (PRC), the EU and the US as the key players with whom increasing trade will allow
Labour to keep its promise.
These three giants are all necessary pieces to solve our trade puzzle, but none is particularly
easy to place. The PRC is increasingly autocratic and is threatening level playing fields through
trade dumping. Some senior figures within the EU are weary of negotiating with us after the Brexit
saga and in any case, the trade bloc keeps a famously beady eye on the intricacies of our trade
agreements with third countries, which hinders the sought-after post-Brexit freedoms that we
bitterly fought our compatriots over. We are a country under a new government trying to work with
the United States, the world’s biggest economy which, it so happens, also has a new leader – one
who is proud of his uncompromising willingness to strong-arm his allies into isolating his economic
enemies.
We’re not powerful enough to set the global trade agenda entirely ourselves, but we’re also too
powerful for players like the United States or the European Union to feel comfortable allowing us
independence in our trade dealings.
So where does that leave us?
With regard to our own bilateral trade relations with the US, it is important to remember that
while it may account for a fifth of total UK trade, the majority of that is in services, which is
unlikely to see Trump tariffs. But that still leaves a third of that relationship (goods) open to
20% tariffs, and all trade ties may be compromised if we find ourselves on the wrong side of Trump.
We’ve been warned by a number of prominent former Trump aides that the President-elect will be
upset with us if we don’t follow suit on isolating the PRC. Nadia Schadlow, a former deputy
national security adviser for strategy under Trump, said if the UK takes a divergent stance on the
PRC to the US, it could ‘have a negative ripple effect across different aspects of the
relationship’.
The biggest fear is that Trump will be harsh on us regardless – by imposing the blanket 20% tariffs
on all foreign imports – and potentially even harsher if we don’t follow his lead on Beijing.
Reeves and the first Labour government for over 14 years seems to be on the right track for part of
this; the UK is looking to reduce border inspections of live animals
exported from Britain to the EU, which will quell the cries of thousands of British
farmers wanting to export more.
The UK is far closer aligned with the EU on food security than with the US. By bolstering
agricultural trade with Europe and maintaining its services trade with the US, the UK can avoid
direct conflict, which would occur if it tried to simultaneously boost agricultural trade with both,
for example.
But even if we can succeed in this, what about the PRC? We’ve seen the large-scale secondary
effects of US tariffs on Chinese imports. The tariffs Biden imposed on Chinese steel has diverted
its oversupply of finished steel products to India, where imports are now at an all-time high. Local
companies are losing out enormously to cheaper products from the PRC, even as domestic demand
surges. As a result, India’s steel ministry has requested a 25% ‘safeguard duty’ to be imposed on
these Chinese imports.
Perhaps such safeguard duties are a strong tactic that middle power countries such as India and the
UK can employ in the face of Beijing frantically looking for a dumping ground for its
overproduction.
When Trump imposed tariffs on the PRC during his first presidency, Xi retaliated by imposing 25%
tariffs on soybean imports from the US, the world’s largest producer. Hitherto the US’ largest
soybean purchaser, but following the retaliatory tariffs, the PRC began purchasing soybean from
Brazil, the world’s second-largest producer. The increased trade ties between Brazil and Beijing
has geopolitical implications, as both countries nudge closer together both bilaterally and through
the BRICS.
While the US can perhaps – for now – afford to stand by such short-sighted decisions, the UK
cannot. Reeves and her negotiating team face an unenviable task in gently persuading Trump that
tariff is not a particularly beautiful word.
To read more about the future of UK-China relations, follow the link here.