Tomorrow is Donald Trump’s so-called “liberation day”, though for much of the world the prospect of America rolling out a punitive new rulebook for its trading relationships feels more like waiting for the phone to ring with bad news.
One of the most senior British figures involved in forming a response to US tariffs tells me that the hardest aspect is the sheer unpredictability of the US President’s way of formulating policy – even when it is on a subject where he has especially strong views.
The result has been a switch in gaming ways to deal with the tariff threat, away from trying to assess individual scenarios – which turned out to be like “trying to follow the trajectory of a bluebottle in a jar; you can never guess where it will head next” – and towards preparing to appear sanguine about any outcome.
Messaging on what is included in the “liberation” has thus swung from a sweeping “no exceptions” tone from the President, targeting any country which has a trade deficit with the US, to a more nuanced version from Treasury Secretary Scott Bessent, who is keener to focus fire on the “dirty 15” of those with the widest import-export gap. The White House has not named those countries, but it would include the EU collectively, as well as several prominent member states.
Happily, this list does not include the UK. Yet even so, as the final knell sounds, it is unclear whether Britain, while included in the general swathe of import levies, might get away with some exception on cars or digital services – or whether much of the recent courtship conducted by Sir Keir Starmer with the Maga man-in-chief results in a large portion of nothingburger.
A lot depends on the whims of a President who has kept many of his own staff and Cabinet in the dark about the precise degree of the tariffs, beyond emphasising that they will be large. Perhaps more important is whether they are intended to open negotiations – or are simply a fiat he can issue, heedless of the consequences.
As this uncertainty has grown, expectation management in London has shifted away from the hope that the “special relationship”, and a cosier relationship with a leader than others in Europe, would turn into the equivalent of a “bonus exemption”.
Best to keep optimism on the lower side: the inclusion of the UK in 25 per cent steel tariffs, with an immediate hit to £470m of exports and impacts beyond on around £2.2bn annually, followed initially positive signals from the White House that Britain was not high on its list of trade enemies.
That disappointment has led to a more sober risk analysis: the likelihood now is that the UK will be hit hard by further tariffs, particularly on cars (which nets the UK well over £6bn a year in sales), where the imbalance in US exports and imports grinds (so to speak) the presidential gears.
But it will also hit pharmaceuticals (£8.8bn a year) via medicines and vaccines. As David Lammy, the Foreign Secretary, put it, we are now “preparing for the worst,” rather than hoping for the best.
Instead, there is a lot more rhetoric about the “cool, calm heads” approach cited by Yvette Cooper and others, which is a polite way of saying that as things are likely to be very negative, the best we can do is suck up the initial impact and then hope to negotiate our way to something a bit less damaging.
What does divide opinion around Starmer however is whether to use the “sharp teeth” of reprisal, targeting US imports (Kentucky bourbon and Harley Davidsons, if either of those are your thing).
That would, alas, come with costs which can bite at home before they make a dent in the US, and President Trump is impervious to signals from Wall Street and his own economic advisers that tariffs are a bad idea. Here, Chancellor Rachel Reeves has been an insistent voice of caution, arguing that the desire to see the UK issue counter-threats is unlikely to pay off.
Crucially, if the bigger aim is to keep the prospective state visit by Donald Trump on track as an opportunity to warm up relations and pull off some reciprocal trade deal – the “golden coach” strategy of ensuring a figure who likes pomp gets it on a stay in Britain – then that would surely be endangered by a tit-for-tat response.
The difficulty for Starmer is to avoid looking like he is prepared to put up with pretty much anything from Trump. Already, Labour MPs have been eyeing the punchier response of Mark Carney, the new Liberal party leader in snap election mode in Canada, who has said that the US is “no longer a reliable trading partner” and that the old relationship with the US “is over”.
The demand that Starmer “do a Carney” and change tone from the present blandishing approach fails to reflect some truths that matter, even to Trump – namely that Canada is the largest export market for the US, due to demand for high-price energy products.
North America’s two big economies are also highly integrated in business supply chains on the US side of the border. Relations, while testy, are likely to go on being intertwined to a far deeper extent than US-UK trade. Beyond the teeth-baring, Carney and Trump will pursue a more polite dance of interests after the heat of the election in Canada.
So the British approach tomorrow, as ministers get ready to access their WhatsApp groups on how to respond to the announcement, will be to grin and bear a rise in levies – and work away at trying to improve the situation by degrees, in the hope of finding some compensatory opportunity in digital services or financial services.
The overall impact however will be a financial blunderbuss for the unavoidable reason that hard-edged protectionism always is. Everyone suffers. The best that can be said for Britain that someone else nearby is having it worse.
Anne McElvoy is executive editor of Politico and co-host of Politics at Sam and Anne’s
