There’s something deeply humiliating about this moment. Sometimes you wonder how much we can possibly take. It’s not clear how long Britain can tolerate being bullied, dismissed and belittled before we stand up for ourselves.
International trade is not a place of high emotion. It’s supposed to be the site of cool, rational, calculated self-interest. But politics is a place of high emotion. Emotions matter. They define the way that governments are seen and whether they succeed.
It’s really not clear if this country can accept being attacked by America without even uttering a word in response, let alone reciprocating. It’s not clear if we can stomach having our domestic policy being dictated to us – not even by the White House, but by the tech bros who seem to have occupied it. How much longer can we tolerate this state of affairs, while talking plaintively about the “special relationship”?
We’ll find out the details of Donald Trump’s tariff regime this evening. He calls it “liberation day”, but the timing is more revealing than the branding. It’s been tabled for after the markets close so that they don’t immediately go into freefall after he finishes speaking.
Tariffs are a stupid tax: they impoverish both you and your trading partners by discouraging the transfer of goods. Trump’s arguments for tariffs are even stupider than most. He assumes that a trade deficit is a problem, when in reality it is simply a sign that you want someone’s stuff. Have American consumers really been penalised by being able to buy cheap Chinese goods? No, they have benefited from it.
square KATE MALTBY
JD Vance's free speech hypocrisy is a threat to Starmer - and the UK
Read MoreThe US president thinks this way because he is incapable of imagining a mutually advantageous relationship. He only recognises zero-sum. That is a barren, broken, nihilistic way of looking at the human condition in general and the trading system in particular.
Labour is severely constrained in its response to the tariffs by our domestic economic predicament. The Office for Budget Responsibility reiterated on Tuesday that the Chancellor’s fiscal headroom of £9.9bn would be wiped out in the event of 20 per cent or 25 per cent tariffs on UK goods.
This is partly the Government’s fault. Chancellor Reeves and Keir Starmer should never have left themselves so exposed, especially once they knew they were dealing with the Trump administration. There was an opportunity, during the initial Trump shock, to make fundamental changes to their position, as Germany has done on borrowing.
This would have allowed for tax rises, which could have significantly improved the fiscal calculation and given the markets renewed confidence in the Treasury’s position. That chance was not taken, and now any global fluctuation risks the fiscal rule calculation, threatening to send Reeves back to the drawing board.
Labour is not to blame, however, for Brexit, which is what has made us quite so exposed. If economists in 2015 could have seen what’s happening now, they would have considered it a preposterous horror story. First, Britain put up severe obstacles to trade with its largest partner, in the form of regulatory and customs checks. And now it faces sky-high tariffs with its second biggest partner.
Tariffs are easier to survive in when you’re big. That’s why the rhetoric from European commissioner Ursula von der Leyen is so much tougher than that from the UK government – because the size of their market means they can inflict proper damage on the US in response. It’s why we’re seeing tentative but meaningful signs of co-operation between China, Japan and South Korea – tantamount to dogs and cats sleeping together.
Britain does not have these advantages of scale, so Starmer has furiously tried to secure a deal for preferential treatment. This is entirely rational. He is following a sensible, conscientious agenda which aims to protect British workers.
He hasn’t succeeded ahead of the announcement – Trump clearly wants a big bang moment to kick things off – but he’s likely to get better tariff rates in future through a UK/US economic agreement. “It’s clear they want to treat us differently, either now or later,” a British official told the Financial Times.
Fine, but that agreement may prove a bigger humiliation than anything happening today. Reports indicate that the Government is prepared to slash the digital services tax for big US tech companies like Amazon, Meta, Alphabet and Apple and then try to make up the money by taxing smaller tech companies based outside the US. It is also ready to lower tariffs on US beef and chicken imports, which would provoke another angry backlash from farmers.
We mustn’t exaggerate what’s happening here. The US is not dictating the whole of our policy agenda. Starmer isn’t prepared to budge on agricultural product standards – the hormone-injected beef and chlorine-washed chicken which we all learned to fear during the Brexit years. There are no signs of the Government changing rules on free speech to address US complaints about anti-abortion protestors.
But the basic reality is that we are having elements of our domestic policy dictated by tech bros in the White House, in a desperate attempt to reduce the economic damage inflicted by a narcissist president, which has an outsized effect on the UK because of our global isolation and economic stagnation. It is a grim, humiliating position to be in.
Around the world, we’re seeing countries stand up to the US nativist threat, from Canada to the European Commission, Japan to Germany. In Britain, we plead for special treatment and offer up our legislative arrangements for an American veto. And then, after all that, we plan to invite Trump for the unprecedented honour of a second state visit. Laying out the red carpet for our abuser.
You can understand why Labour is doing what it’s doing, but by God it’s hard to watch it while maintaining a sense of national pride. Eventually that feeling, as ephemeral and hard to define as it is, could do more damage to the Government than Trump himself ever could.
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