The European Union has hit back against Donald Trump’s decision to impose 25 per cent tariffs on steel imports. “Tariffs are taxes – bad for business, worse for consumers,” the European Commission president Ursula von der Leyen has said, adding that the levy “will not go unanswered”. Yet for all the fire and fury, Europe will not be quite as united as it wishes. The British government has made it quietly clear that it will not be joining the fight. The Daily Mail reports that the Prime Minister is poised to split from the EU by holding off retaliating. The PM right: this is a fight from which Britain has little to gain and a lot to lose.
It isn’t clear what kind of retaliatory tariffs the EU might impose on US imports into the Single Market. Last time around, it singled out Harley Davidson motorbikes and bourbon whiskey. This time, it could be Boeing planes, or a levy on American tech giants, such as Apple or Meta. We will see over the next few days. For now, von der Leyen has stopped short of direct trade retaliation. She is due to meet US vice president JD Vance, so she may be biding her time to start negotiations. But whatever measures the EU does decide to impose, Starmer is right to ignore his pro-EU instincts and not jump on the bandwagon.
Trump does not really bother himself with small details such as consistency. He has switched from suggesting the UK may be exempt from his tariffs, to describing the UK as ‘out of line’. But while it is anyone’s guess what he will do next, the US president appears at least open to negotiating a deal with the UK that exempts British companies. Indeed, European exporters may be able to get around the tariffs by routing sales through UK ‘subsidiaries’, which could turn into a lucrative trade. The bulk of our exports to the US are services, and they are free of tariffs. We have casually destroyed most of our manufacturing industry with punishing energy costs, green levies and taxes. The result? We don’t make or export much steel, unlike European companies such as ThyssenKrupp or ArcelorMittal. We have far less at stake, so backing the EU over the US on this would be a big mistake.
Even if the EU does decide to hit back hard, it seems likely that Europe is going to lose this fight. The flaw in its plan to retaliate is that it runs a huge trade surplus with the US (worth 155 billion euros annually, or £130 billion). It already imposes tariffs on American goods, such as the ten per cent levy on cars. Its weapons in this fight are rather limited.
Sir Keir Starmer’s management of the economy has been hopeless since he won the election last year. The PM has imposed steep tax rises, let public spending rip out of control, and allowed the hopeless Rachel Reeves to blunder on as Chancellor even as it becomes painfully clear she is out of her depth. Growth has collapsed, and it is unlikely that it will recover any time soon. Even so, he has finally made the right decision. It will drive the UK further away from the rest of Europe, but there was no point in joining the EU’s retaliation against Trump.
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