Tag Archives: Tariffs

Britain, Economic, Government, International trade, Politics, Society, United States

UK-US trade deal: Parliament must vote on any agreement

TRADE DEAL

Intro: Abolishing tariffs would be welcome for UK firms, but not at the price of reducing high regulatory standards or a reset with the European Union

LOOKED at dispassionately and objectively, a bilateral trade agreement between Britain and the United States is of relatively small economic significance to this country. Even ardent supporters of UK-US relations will find it difficult to argue otherwise. Back in 2020, for instance, Boris Johnson’s government estimated that a US deal “could increase UK GDP in the long run by around 0.07%” – a statistical calculation that is not exactly transformative. The view touted by some Brexiters that a US trade deal would fire up the entire British economy was always fantastical. Based on the assumption of a yearning for deregulation, there was little public support, even among leave voters themselves. Any urge of that kind now is even more delusional, in the wake of Donald Trump’s tariff wars.

The deregulatory alarm is hopefully a thing of the past. But global trade has new traumas too. Trump’s protectionist policies and bullying of US rivals are resetting the terms. There are nevertheless specific reasons why it is in Britain’s interest to pursue free trade talks with the US. Chief among these is the direct threat posed by current tariffs, especially on cars and pharmaceuticals. There is also the distinct prospect that a 10% tariff will be re-imposed on all UK exports to the US after the current 90-day pause ends in July.

The problem with any trade deal lies with the prices that the US may try to extract for tariff reductions or exemptions. And while the U.S. vice-president, J.D. Vance, has said that he sees a “good chance” of a deal, this could still be contingent on UK concessions in sectors such as agriculture, sanitary rules, and digital regulation. These are the same sectors that, for good reason, proved to be stumbling blocks in the post-Brexit discussions. Efforts to rebrand things like AI, biotech, and digital infrastructure, as strategically vital industries of the future, do not dispel some real threats now facing British food standards, healthcare, or online controls.

All this is multiplied by the Trump administration’s unreliability and geostrategic approach. Trump’s policy in Europe is to weaken and destroy the EU. Urged on by right-wing Brexiter politicians, the president sees pulling Britain away from the EU’s orbit as part of that effort. So, however, does the EU. As a result, any attempt by Washington to offer generous terms to the UK in particular sectors is likely to make any reset with the EU far more problematic. Sir Keir Starmer says that Britain does not need to make an either/or choice. Insisting that Britain can have its cake and eat it, that’s hardly the brutal reality being faced; neither the US nor the EU will necessarily take the same generous view that Starmer holds.

Even if the prospective UK-US deal is less wide-ranging than it once might have been, it is still significant. Politically, the Trump factor also makes any such deal more explosive. UK treaties and international trade deals are traditionally delivered under prerogative powers. As the Brexit argument about a “meaningful vote” showed, there is a very limited role for parliament. That needs to change. It would be intolerable in the UK-US case. This is clearly a matter for parliament to debate, both during and after negotiations, and for both houses of parliament to vote on.

In recent days, the Labour chairs of the Commons foreign affairs and trade select committees called for such votes. The Liberal Democrats and the Scottish National Party are both in favour. The UK government should make clear that no agreement will go ahead without a meaningful Commons vote in favour. Democracy cannot be usurped on this issue.

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China, Economic, Government, International trade, Politics, Society, United States

Global trade war: America is advancing its own decline

ECONOMIC

Intro: China is braced for economic turbulence due to swingeing tariffs. But it sees an opportunity by taking the longer-term view: a decline in US hegemony 

THERE can be no winners in Donald Trump’s ferocious trade war that he has unleashed, least of all among consumers and workers. In strongarm tactics, this has become a game of who can bear more pain. And because trade is at the heart of US ties with its biggest tariff target, China, the rest of the bilateral relationship is likely to deteriorate. That too is concerning.

Yet, paradoxically, despite the economic struggles of recent years, China may see a longer-term opportunity in the current crisis. Beijing’s response to the initial US tariff announcements was measured. Now it vows to “fight to the end” and has imposed an additional 50% tariff on US goods – taking total tax charges to 84% – in retaliation for reciprocated tariffs that Mr Trump now says will hit 125%.

Such an approach is unlikely to falter first. Any concessions would likely be taken as a sign of weakness, encouraging the US to ramp up the pressure even more. Xi Jinping is also a strongman who has dialled up nationalism as economic growth has slowed. Backing down would be humiliating, especially when the US vice-president, JD Vance, speaks dismissively of “Chinese peasants”.

Beijing is already allowing the yuan to weaken, but a major devaluation in the currency is thought unlikely. It has been preparing for this moment. China’s demographic boom is at an end, Mr Xi’s new vision for his nation, the impact of the pandemic, Donald Trump’s first term in office, and US bipartisanship have all turned against China in reshaping the world economy. But China has diversified in areas such as agricultural imports and found new markets for its goods – though exports to the US still account for just under 3% of its GDP. In recent weeks, it announced plans to “vigorously boost” domestic consumption, although previous action on that long-held ambition has not matched the rhetoric.

Mr Trump’s sudden announcement that he is suspending punitive tariffs on other countries for 90 days highlights an apparent underlying intention to make them distance themselves from China and stop them being used as a conduit for its goods. Still, if he goes ahead, high rates risk pushing them towards Beijing instead. Trump’s erratic policy may also reflect growing anxieties about the impact of those tariffs, not least among his own supporters. China is quietly confident that the U.S. will come under growing pressure to rethink from billionaire backers, ageing workers worried that their retirement funds are losing value, farmers, employees fearing for their jobs, and consumers contemplating higher prices in everyday consumables. A bilateral deal is not impossible, but sense needs to be restored.

Beijing does not like what lies ahead. But in the longer term, it has more confidence in its trajectory. It looks back to the 2008 financial crisis, when it “saved the world” with its massive stimulus package, and looks ahead now with emboldened self-assurance following its launch in January of its AI DeepSeek platform.

Above all, Beijing believes that when this storm has passed, few will regard the US as a dependable economic or security guarantor, with China becoming a more predictable and likeable partner. At February’s Munich security conference – where Mr Vance’s sneering attacks on European allies made the headlines – China’s foreign minister, Wang Yi, pledged that China would be “a steadfast constructive force” and “factor of certainty in this multipolar system”. Some countries may feel forced to live with Beijing’s own trade and investment restrictions, and its use of economic coercion for political purposes. But others may simply drift from America’s orbit.

China expects to suffer, but as it watches on it will not be entirely unhappy as the US advances its own decline.

This is a transformational moment in the global order.

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Britain, Economic, European Union, Government, International trade, Politics, Society, United States

Trump’s tariffs: a deliberate and revengeful choice

WORLD TRADE

DONALD TRUMP’S revisionist structure of world tariffs against an already embattled trading system is as though an asteroid has crashed into the planet, devastating everyone and everything that previously existed there. The comparison is useful but there is this important difference. If an asteroid struck the Earth, the impact would at least have been caused by ungovernable cosmic forces. The assault on world trade, by contrast, is a completely deliberate act of choice, taken by one man and one nation.

The US President’s decision to impose tariffs on every country in the world is a shocking and momentous act of folly. Unilateral and unjustified, it was expressed in indefensible language in which Mr Trump described US allies as “cheaters” and “scavengers” who “looted”, “raped”, and “pillaged” the US. Many of the calculations on which he doled out his punishments are perverse, not least the exclusion of Russia from the condemned list. The tariffs – imposition of direct taxes – mean prices are certain to rise in every economic sector – in the US and elsewhere – fuelling inflation and very likely recession. Trump will presumably respond as he did when asked about foreign cars becoming more expensive: “I couldn’t care less.”

The tariffs – a minimum of 10% on all imports to the US, with higher levels on 60 nations that have been dubbed the “worst offenders” – throw a hand-grenade into the rules-based global trading order. These are large hikes, even for nations like Britain that have escaped the higher tariffs. They are indiscriminate between sectors, highly discriminatory against nations, even to the extent of penalising uninhabited islands in Antarctica. Foul.

The world trading system established under US leadership at Bretton Woods after the Second World War has been overturned. In effect, the nation that has underpinned the global economy for the last 80 years has expelled itself from the trading system it always led. That system’s cardinal principle – that countries in the World Trade Organisation should treat one another equally – has been blown apart.

The ceremony on which Trump made his announcement conveyed the thrill he derives from bullying and domination. A month after shutting down US development aid, his retribution list embodies special contempt for the world’s poor – 47% tariffs on Madagascar, the world’s ninth poorest country, for instance, or 44% on devastated Myanmar. While much pre-announcement rhetoric was directed at China, some of the toughest tariffs have been inflicted on countries such as Cambodia, Vietnam, Thailand, and Laos. The impact on US soft power is likely to be devastating.

In the UK, the government is trying to remain stoic. Like its trustworthy trading allies, Britain must do what it can to maintain the rules-based trading system by keeping calm. But economic war is clearly beckoning. The UK is now said even to be preparing a list of reciprocal tariffs on US goods. It is particularly vital that Britain defends its interests in food and health systems, and against the powerful digital tech giants.

Any kind of notion that Britain is some kind of winner in these circumstances, thanks to Brexit, is nonsensical. This country’s supposedly closest ally, the US, has just hiked the cost to British exporters by 10%, with an even greater rise of 25% in the case of steel, aluminium, and cars. The consequences of Trump’s tariffs will not be restricted to world trade but will impact on the global economic system more generally. This is a momentous macro moment. It will require macro responses.

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