Donald Trump and the UK
As the shock-waves of Donald Trump’s dominant victory in the recent US Presidential elections continue to sweep around the world, I thought it might be helpful/useful to pull together a few initial thoughts and some observations on what it might mean for the UK.
For busy readers, a quick summary of the major concerns for the UK include:
Whether the UK will be subject to 10-20% tariffs on exports (the US remains the UK’s second largest overall export market and the second largest export market for cars) and, if the UK is in-scope, how to negotiate with Trump to mitigate the impact/reduce the tariff level/what the UK might have to give away to avoid them;
How the EU responds to tariffs. If the EU raises its tariffs on Chinese goods as part of a political or mitigation deal with the US, then the UK may be flooded with Chinese goods that cannot find another route to market. Equally, if the EU agrees to buy more US LNG (and reduce its purchases of Qatari gas) as part of a deal with the US, the potential impact that might have on the UK’s access to international LNG markets (on which it is dependent);
The impact on the UK’s fiscal headroom (which has already taken a haircut due to the rise in gilt yields) of a global trade retraction caused by tariffs. The Chancellor has promised not to go back to the country with further tax rises (but many commentators now view that as inevitable in the Spring);
The impact on NATO and Ukraine of a Trump retreat (the UK is a major contributor to Ukrainian defence, but is one of the countries not currently meeting the 2% of GDP on defence);
Concerns about the viability of international organizations if Trump decides to defund them including in particular, the WHO, the WTO, the UNFCCC (the UK has made the defence of the rules-based international system a key foreign policy priority);
The viability of the UK’s own net zero and decarbonisation targets if Trump ends subsidies for renewables on ‘Day One’ as he has threatened to do (and today’s news that RWE has cut $55 billion of renewable investment in response to Trump’s victory is a very clear indication of a significant disruption in the shift to renewables);
And two final, lower-level points:
Whether President-elect Trump will feel it necessary to remember comments made by Foreign Secretary David Lammy and Labour’s well-publicized assistance to the Democrats during the election (though, as one advisor commented last week, Trump is used to hyperbole so he may simply pass off Lammy’s comments as being in the same box. Equally, since Starmer was one of the first foreign leaders to congratulate Trump after his victory – a call described as ‘warm and productive’ we may already be over this hurdle);
Who the UK should appoint as the new Ambassador to the US? It will be a crucial appointment in handling the relationship – and Dame Karen Pierce, who has been instrumental in creating strong links with the Trump team, will be a hard act to follow. Lord Mandelson appears to be head of the list. He has experience and is politically savvy – qualities that the UK will need in navigating Washington over the next four years.
Which leads us to the final, and perhaps, most important point: in which direction Trump’s victory will impel the UK – whether towards the US or the EU.
This dichotomy was thrown into very sharp relief by the competing comments from Pascal Lamy and Steven Moore over last weekend – both claiming that the UK’s long-term interest lay in throwing in its lot with their side. It may be difficult to ride both horses as the conditionality demanded for a US FTA would be likely to make a closer trading relationship with the EU more difficult.