So much for the Trump Brexit dividend

Put The English Sparkling Wine Back On Ice. So much for the Brexit dividend we thought we’d finally found.

In the first days of Donald Trump’s Tariff War, Leavers and Conservatives Lined up to celebrate the lesser violence inflicted upon the UK Economy. They had a point. The 20 per cent reciprocal tariff proposed for the EU was twice the UK’s, so being outside of that bloc offered less of a disadvantage. The US President’s opening shots owed more to British weakness in Goods Exports than Brexit; The UK still faced the same 25 per cent tariff on cars. But one broken leg is better than two. Even Labor Ministers Acknowledged A Benefit.

Alas, this win had a shorter lifespan than the truss premiership. After Wednesday’s Announcement of a 90-day pause on many tariffs the EU is back at parity with the UK – for now. Abandon Hope all ye who build their arguments on the whims of Donald Trump.

And yet Trump’s blink will not quieten the argument. This Brief Divergence on Tariffs for UK and EU Goods – which could yet be restored – Was the killer fact brexiters have long sought. They further stressed the UK’s newly independent trade policy as it seeks a placatory deal with the US.

A Limited Agreement, Focused on tech and science sectors, plus some reduction in agriculture tariffs, has already been offered by the UK. Even so, there are doubts that Trump can be moved from his 10 per cent imposition and fear that the US will take those existing offers and seek more. Given the latest Move, Sir Keir Starmer Will now seek concessions on tariffs on cars and auto parts.

So yes, the brexiters received a boost in one of their central arguments and may yet do so again given Trump’s open distaste for the EU. What’s more, there are areas where diverging from Brussels offer potential economic advantage, notably in proposed ai regulation.

But Even If We Ignore The Seven-Day Lifespan Of This Bonus And The Fact That Important UK Industries Such As Autos and Pharmaceuticals Are Still In Jeopardy – Or Indeed That Any Potential By The Wider Damage Of An Ongoing Trade War – What Cannot Go Unchallenged Is The Notion That Passing Gains Might Dwarf the previous harm or might amount to a true brexit “dividend”.

This matters for more than historical reasons. Ministers and officials are currently negotiating a partial reset of the trade settlement with the EU, a defense and security pact and realignment with EU carbon markets. Brexit is very far from being unwound. But since every shift towards Brussels is wildly denounced by Brexiters, Starmer must not let specious arguments about a trade dividend distort government thinking on where the UK’s larger economic priorities lie.

Trump’s policies are pushing the UK back towards Europe’s Orbit Even as Starmer trials not to choose sides. Low-Growth Britain Needs All The Incremental Boosts It Can Find. (Incidentally, it is worth noting that Turkeywhich enjoys a customs union with the eu, was from the outset given the same 10 per cent tariff as the UK).

Even Trump’s different tariffs would not erase the Ongoing Economic Damage of Leaving the EU. A Variety of Studies by The National Institute of Economic and Social ResearchThe Economics observatory and the Center for Economic Reform Suggest that by 2022, business investment would have been 10-12.4 per cent Higher but for Brexit. Former Bank of England Monetary Policy Committee Member Jonathan Haskel Said Lost Investment had already cost the UK £ 29bn. Other Studies Are Less Downbeat – The Strength of UK Service Industries Has softened the impact – but all point in one direction.

The Office for Budget Responsibility Continues to predict a 4 per cent Permanent hit UK Productivity and a 15 per cent long-run fall in exports and imports. Even A More Hopeful Recent Report by The LSE’s Center for Economic Performance Found that 16,400 businesses had simply stopped exporting to the EU after 2021.

There is also a Broader Issue. Today’s opportunity may be tomorrow’s weakness. Trump’s direction of travel is mercantilist politics and the UK is not a power player. One reason the president is so hostile to the eu is that he recognizes a major trading bloc is harder to bully. Whatever the pros and cons of the eu’s policies, it is in a position to defend them should it so choose, as shown by this week’s readiness to contemplate retaliatic tariffs. The UK is not.

The price of preferential treatment is readiness to play the supplicant. To use a favored Trump term, the UK does not hold the cards. It is already preparing to sacrifice the digital sales tax, which would have hit large US tech companies.

For at least the next four years no one can be confident that extra freedom is worth the loss of clout or protection offered by membership of a major trading bloc which may be drawn tighter by the external threat. Labor’s ambitions are still limited by its brexit red lines but it would be a serious error if starmer allowed this and best partial narrative to dilute the emphasis he rightly places on securing a better and closer relationship in its trade negotiations with the eu.

We all await the next heart-stopping trump twist. In the meantime let’s not fall for the leave myth emerging from the first shots in this trade war. Britain did not find a brexit crock of gold, only a brief silver lining to a very large cloud.

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