Philip Pilkington

Why Britain will lose from America’s trade wars

Photo by Leon Neal/Getty Images

Davos this year marked the start of a great economic divorce of the United States and Europe. Katherine Tai, the US trade chief, said that globalised capitalism is not working anymore. It leaves workers behind and gives fuel to populists, she said. Really, the Biden administration wants reassert US dominance in the world, and is using the country’s economic weight to do it. The Europeans, meanwhile, seem happy to become more protectionist too, with France’s Europe minister Laurence Boone calling the new US stance a ‘wake-up call’ and saying that Europe should respond in kind. Europe’s leaders are reacting to the reality that, with high energy prices, their manufacturing cannot remain competitive without tariffs.

The last time Europe and the US put up trade barriers against each other, the world went into the Great Depression. We’ll soon find out what happens this time around. What’s certain, though, is that it puts Britain in a perilous place. Britain is at the centre of this trade war, and it could tear the country’s economy in two. Its top four trade partners are the US, Germany, the Netherlands, and France. If Europe and America get into a trade war, Britain will be forced to pick a side.

Looking just at economic statistics, Britain should side with Europe. While Britain’s relationship with the EU is tense after Brexit, and its ties to the US – especially in foreign policy – are much deeper than those on the Continent, trade between Britain and the United States in 2021 accounted for 13 per cent of total trade, while trade between Britain and the EU made up nearly half of the total. Britain, though, would burn a lot of bridges siding with Europe against the United States. The large finance industry in London needs access to the European market.

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