April 3, 2025 - 7:00am
America is once again at war — a trade war, this time, with the rest of the world. Donald Trump declared hostilities yesterday evening, announcing a package of tariffs on US trading partners, including the UK.
There will be a 25% tariff on cars imported by the US and a minimum 10% tariff on all imports. For many countries, the minimum is just a starting point — extra “reciprocal” tariffs will be charged depending on a US government assessment of all trade barriers (not just tariffs) to American exports. Though the UK won’t have to pay as much as the EU, hopes that we would escape the basic 10% tariff — plus the 25% tariff on cars — have been dashed.
As for how much this is going to cost us, there’s an estimate in the latest outlook from the Office for Budget Responsibility. Under its “scenario 3” — i.e. a full trade war between America and all its trading partners, including the UK — the OBR reckons British GDP would be reduced by 1% next year and 1% the year after that, with diminishing subsequent effects.
That’s bad, but not catastrophic. What’s more, the OBR forecasts don’t account for what a smart response to these economic pressures might achieve. According to the Times this week, British companies are already set to invest $650 billion over the next three years on reshoring productive capacity from China and other locations.
The calculation is that disruptions to international trade — of which Trump’s fondness for tariffs is just one example — have wiped out the cost advantages of offshoring industrial production. The British Government could and should lean into this tipping point, tearing down barriers to re-industrialisation.
This is especially important if Trump’s “tough love”, as he called it yesterday, forces the UK to double or treble its defence budget. By far the best way of affording this enormous cost is to ensure that British employers and employees are positioned to benefit from the extra spending. In other words: never let a crisis go to waste.
There are those who’d rather use the trade dispute with America to stampede Britain back into the EU. The Liberal Democrats are leading the charge, with Ed Davey calling for Britain to rejoin the EU’s Customs Union. This would expose us to higher tariffs and end our ability to set our own trade policy. It would also force us to leave the CPTPP trade agreement, which provides a model of free cooperation between sovereign nations — and an alternative to the dark vision of a world divided between predatory trade blocs.
But what if that dark vision is the new reality, thus compelling the UK to join (or rejoin) the least worst option? Prominent Remainers are already making the case that Trump’s refusal to exempt the UK from his trade war is a “clarifying moment”, and that we must “turn to the EU”. Expect a lot of this in the weeks ahead.
However, such responses overlook the fact that Brussels is as much of a protectionist bully as Washington — if not worse. At least the Americans aren’t demanding that Britain pay billions into their federal budget or make net contributions to their agriculture subsidies. Nor are they attempting to dictate our immigration policy or subjugate our parliament to foreign laws.
As a member of the European Union, Britain was forced into all of these humiliations. And in return for what? Not much more than the right to trade with its closest neighbours, which is something that it could have negotiated — as equals — had the EU never existed.
Donald Trump forgets he’s dealing with America’s allies rather than his business cronies. Yet we mustn’t ignore the fact that his presidency will last for years, not decades — unlike any agreement to return to Brussels. Things could be far worse for Britain.
Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.
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SubscribeYes, at times like this we could do with control over our trade policy.
The OBR reckons British GDP would be reduced by 1% next year and 1% the year after that, with diminishing subsequent effects.That’s bad, but not catastrophic.
What planet is the writeron-according to the OBR GDP) will grow by 1.0% in the 2025 fiscal year and will then speed up to 1.9% in 2026.However in 2027 growth will slow to 1.8%, according to the OBR forecast, and will slow again in 2028 to 1.7%.
I would posit that if the UK economy achieves anything like that it would be close to a miracle.
We have an escalating debt servicing cost both in terms of principal oustanding and interest charged with Gilt costs circa 4.5% on debt at 100% of GDP and the forecast GDP reductions are likely to pretty much wipe out any growth.Its looking more and more like a death spiral.
At least we have lots of gold, which is now soaring.
Oh, wait …
Don’t panic Brexiteers! Re-joining quickly isn’t an option, isn’t on the table, and folks are going to wait and see how Trump’s actions play out first anyway. What may make quite a difference is what Trump requires for any UK trade deal medium term and that we don’t yet know.
It is true though that Trump’s action could drive UK back to EU quicker than might otherwise have happened, but whatever it’s not happening tmoro. EU is likely to evolve too given these shocks, but part of it’s rationale was for moments like this, albeit it probably never expected things to play out quite this way. Nonetheless it remains a huge single market with many potential advantages if it seizes some of the opportunities. It’s actually got more population than US, if not the same purchasing power.
It’s poss Trump wanted to give some indication UK’s Brexit advantageous as he’d want to weaken EU. The existence of a big trading bloc is a threat to his Policy in that it has the size to fire back significant ordnance. However it appears the tariffs are set based on trade deficit/surplus in goods and just so happens UK’s position is different. Who knows with Trump though. Things could all change in a few weeks.
It is true though that Trump’s action could drive UK back to EU …
It’s hard to fathom the sheer economic illiteracy embodied in that statement. The US is our biggest trading partner. Trump has just presented us with an opportunity to massively expand that trade at the expense of the Europeans. On what planet would it make sense to rejoin the EU at this moment?? Give me strength!
As I noted, much may depend what he wants for a trade deal that removes the 10%. If that’s crippling for our farmers and other industries, UK may take view a major shift away from US inevitable and better to deal more with our closest neighbours. US is our biggest single country who we trade with, but EU overall much bigger trading partner.
Coupled with Trump’s approach to European security he’s doing much to push us back towards closer European alignment, maybe with some interesting deals too with likes of Canada and India (if not China).
Trump may not be factoring in the law of unintended consequences much. We’re going to find out.
I’ll concede that Trump doesn’t understand the law of unintended consequences (unless he actually planned for the Conservatives to lose in Canada ! so hard to know what Trump’s actually thinking sometimes – or indeed if he’s thinking at all).
On your earlier point. The total EU population is shrinking (catastrophically in parts of Eastern Europe). And EU GDP, growth and productivity are under-performing the US. The EU is becoming less globally relevant every year. That’s not likely to change.
Now I will also concede that the UK is one of the few growing populations within the EU (current projections for next few decades). So the UK gradually becomes more important to the EU every passing year. We need not be the weak supplicants and victims you imagine.
I have been doing business in and with the EU for over 25 years and “evolving” is not really one of their attributes. They are very good at enacting new prohibitions and restrictions, not so good , i.e. terrible, at discarding red tape and duplication.
Starmer and the other globalist cutouts in the EU are in a race against the tides. If they want to print money like mad in sort of a war economy, until it all collapses on them, or the citizens who are groaning under it all find a way to get rid of the establishment the US might as well get some benefit out of it.
Britain probably has the greatest level of foreign market access of any country in the world this morning. We have tariff free access to the EU, the lowest level of tariffs for the USA and free trade with CPTPP. And we can continue to negotiate with India, China, Saudi etc as a free agent.
New Zealand and Australia have 10% on the US but no FTA with the EU. Canada has an EU agreement but it is unclear where it stands with the US, Ditto Mexico.
Thank God for Brexit!
I know – it’s strange this is so often overlooked. The status quo really isn’t that bad.
What really worried me about the EU was the potential liability for debt mutualisation across the EU – the moment when the debts get shared around (Tony Blair raised this as a good idea !) and the wealthier nations forced to bail out the rest (or continue to bail out the spendthrift centre). I’ve always seen this as a “when” rather than an “if”. The Greek debt crisis wasn’t quite enough to push this over the edge. But some future crisis may do. My understanding is that we’re probably still in a transition period where we have some potential (and likely uncapped) liabilities to the EU for this sort of thing. But I think at some point that those expire and we’re off the hook. I hope so.
Abso – bloody – lutely! We should be rejoicing. Now we have a great opportunity to steal trillions in business from the EU. The government should immediately offer incentives to European manufacturers to move to the UK and exploit our advantageous trade relationship with the US. Fat chance though, eh?
If the UK could get its act together then it might be able to take advantage of the emerging multipolar world. The EU and Brussels are a dumpster fire. The UK could at least emerge as the regional power for Western Europe. Getting there is not going to be easy or painless though.
You’re right: we could. Unfortunately we don’t have a governing class that is even remotely capable of exploiting the opportunity.
Of course we would not do it.
Remember that TTK and “Girl from accounts” are really cheap.
Give them some French clothes and glasses and they would screw uk in no time.
Don’t hold your breath waiting for the MSM to acknowledge your very good point….
It’s hard to imagine anything actually changing re the UK rejoining the EU any time soon. There’s just too much else going on for anyone to have the appetite for reopening this. The scarcity of articles like this these days rather proves the point.
In a Britain where it so often feels like “nothing works”, we’re increasingly aware that most of our problems are home made.
This just feels like more of the usual performative politics – people saying what they are expected to say. But what else can Ed Davey say (mistaken though I think he is) ? He represents many of the EU diehards – and these people do need representation.
It’s also sad that we haven’t made more of the opportunities leaving the EU gave us. Yet. Perhaps we’ll eventually settle on some good ideas after exhausting all the other possibilities (as Churchill once said of the US).
Well said.
Before Brexit, we weren’t even as free as the EU allowed us to be. Consider the diversity of policies among EU member states (on taxing, borrowing, energy, immigration, education, healthcare, transportation, freedom of speech, gun control and the nanny state). If we’d adopted the best policies from around the EU, we would have been happier and wealthier than any of them.
I was always more concerned about the trajectory of the EU than the constraints that existed in 2016. The EU tries to elevate bad policy beyond the reach of national electorates, but even now – nearly a decade later – those national governments have lots of freedom if they choose to use it.
The main problem with the EU is that provides cover for national rulers to impose unpopular policies: “don’t blame us, blame Brussels!”. Whitehall was infamous for “gold-plating” EU regulations, and enforcing them with more zeal than governments on the Continent.
Post-Brexit, with the excuse of EU directives stripped away, the oppressive nature of our local ruling class has been laid bare.
Agree with everything you said.
Yes, I was far more concerned with the future direction of travel for the EU than the existing policies. Their decision making has got worse over time. But so has ours !
You can’t help feeling that the existence of the EU has a tendency to emasculate national politicians – and that many of these politicians actually prefer this.
Yes.
What a welcome note of sanity. Thank you, Mr. Franklin.
Hopefully the differentiation in the tarrifs placed on the EU and the U.K. will actually tip the balance further from Rejoining – not nearer.
Yes.
Exactly. Why this piece (or at least the header) pointed in the opposite direction – even if arguing against – is another matter.
Fingers crossed….
Well, rejoining has nothing to do with level of tarrifs.
Crazed remainers would join even if they were just guards in EU gulag.
They hate uk, there are traitors.
We used to have death penalty for treason.
Fortunately for well known Remoaner traitors it was abolished.
Good article.
It’s a shame we’re ruled by awful people, who want to restore the old EU humiliations and add some new ones, most notably the Euro.
Closer integration with the EU – the E-Utopians answer to everything.
The Euro would be the least of our problems were we to rejoin.
Peter makes his points well. It struck me when trawling through all the linked articles and comment pieces on the BBC this morning that the fact that the EU has been charging the rest of the world worse tariffs than these, and for longer, was not mentioned ONCE.
Really, their liberal-globalist bias is showing through more strongly than ever.
Good point about the pre-existing EU tariffs. It would be interesting to see the details of that (has the EU been imposing greater duties on American goods than vice versa for the last 50 years?).
I have more sympathy for tariffs than I once did. To the extent that they enhance national security (by maintaining an industrial base) and counteract weaker labour and environmental standards in other countries, I think they’re a good thing, even though they drive prices up for consumers.
But I wouldn’t be surprised to find the EU complaining about practices they themselves have pursued.
All that said, I’m not sure how tariffs fit with the liberal-globalist moniker. You’d expect true liberals and globalists to embrace free trade.
The EU has always struck me more as a project to elevate nationalism to the continental level. Or at least it did before they threw open their borders. Maybe it’s a case of competing factions.
EW, I don’t think tariffs fit with the liberal/globalist moniker at all. That was sort of my point.
The BBC is happy to paint Trump as an evil (in their eyes) nationalist protectionist. But gives the EU, who do the same thing, and for longer, a free pass.
That’s because they approve of the EU, and hanker to return us there.
Great comment.
This corrupt, woke entity called Bull**t Broadcasting Corporation should had been defended and disbanded decades ago.
But somehow Conservatives (even Thatcher) did nothing about it.
Gods comment after a good article.
Thanks, John.
(Although I’m hardly divine… )