Trump tariffs must not deter Starmer from seeking closer EU ties

Editorial: The threat of Trump tariffs should not divert the prime minister from the vital task of removing trade barriers with the UK’s most natural and biggest partner

Donald Trump’s imposition of tariffs of 25 per cent on goods from Canada and Mexico and 10 per cent on Chinese imports is bad news not only for these countries, but also for the US and the rest of the world.

As the US president acted on the threats he had made during the election campaign, the White House said the tariffs on Canada would remain until it “cooperates with the US against drug traffickers and on border security”, and held Mexican drug cartels responsible for trafficking the synthetic painkiller fentanyl and other substances. It claimed that China “plays the central role in the fentanyl crisis” through exports.

Canada has already hit back with tit-for-tat measures including 25 per cent tariffs on £17bn worth of US goods entering the country, with a further £69bn worth of US imports set to be added to the list in three weeks’ time. “We didn’t ask for this, but we will not back down,” said Justin Trudeau, the outgoing Canadian prime minister. Similarly, Claudia Sheinbaum, the president of Mexico, has ordered retaliatory tariff and non-tariff measures, while China said Mr Trump’s move “seriously violates” World Trade Organisation rules.

US businesses are alarmed at these developments, which could raise prices and inflation in America while harming growth. On the face of it, Mr Trump is playing with fire, given the damage done to the Democratic Party’s election prospects by the impact of inflation on living standards. However, Mr Trump’s allies suggest that the measures do not signal a global trade war in which there would only be losers, but rather constitute the great deal-maker’s opening move in a negotiation that could eventually see the tariffs lifted if he is able to claim tangible progress, for example on border security.

The president made clear that the EU is also in his sights – and the 27-member bloc is gearing up to retaliate. Even if the UK avoids being targeted directly with tariffs – as the Starmer government hopes it will – it is unlikely to escape the fallout. There will be trade diversion, and supply chains will be affected. Canada will urge the UK to join it and likeminded nations in opposing the Trump tariffs; there is even talk of a G6 alliance, formed of the G7 minus the US.

This would put Sir Keir Starmer in an awkward spot as he tries to build a working relationship with the new president – as will the prime minister’s drive to reduce trade barriers with the EU, which will begin in earnest when he meets his EU counterparts at a dinner in Brussels on Monday. Predictably, Kemi Badenoch and Nigel Farage are warning that the UK will be more vulnerable to US tariffs if Sir Keir hugs Brussels close.

It is true that, in a worst-case scenario, US tariffs on UK imports could mean higher UK interest rates and a hit of up to 2.5 per cent to UK GDP over three years, according to the National Institute for Economic and Social Research think tank. However, The Independent believes Sir Keir should ignore the discredited Brexiteers – whose pet project is on track to reduce UK GDP by 4 per cent over the long term – and pursue closer economic links with the EU.

The UK should simultaneously seek a deal with the US on services and advanced technology, including AI. That is much more realistic than a traditional one including agricultural and food products, on which it makes sense to reach a veterinary agreement with the EU to reduce trade friction. There is no contradiction between a deal with the EU on goods and one with the US on services – unless Mr Trump wants to create one by forcing a choice on the UK, which regrettably he might.

Despite the bruises left by Brexit, the EU might prove a more reliable partner than the mercurial US president who, after all, has just ripped up the US-Mexico-Canada trade agreement he largely dictated in his first term when he abandoned the North American free trade agreement.

Although the US is the UK’s single biggest trading partner, with exports of £188bn, that is dwarfed by the £346bn of UK exports to the EU. Unfortunately, Labour’s “red lines”, which stipulate that Britain will not be part of the single market, customs union or free movement, will limit the scope of the EU negotiations. But there is still much to be gained from a better deal than the threadbare one Boris Johnson struck: the reset could offer the UK its quickest and easiest route to some much-needed growth, and could eventually be worth up to 0.7 per cent of GDP.

Sir Keir should aim high. He should overrule Yvette Cooper, his home secretary, who on Sunday reiterated the government’s opposition to a youth mobility scheme. This is a key EU demand, and negotiations will stall unless the UK compromises. Such a scheme would not amount to free movement, as its critics suggest it would.

Sir Keir will need to be bold. He should ignore the self-serving “noises off” from the Tories and Reform UK, and remember that the public prioritises links with the EU over the US. The threat of Trump tariffs should not divert him from the vital task of removing trade barriers with the UK’s most natural and biggest partner.