Keir Starmer faces a trade dilemma due to President-elect Donald Trump’s tariffs

Simon Sutcliffe, Customs & Excise Duty Partner said:

Not since the 1930s with the Smoot-Hawley Act has the US considered such a protectionist trade policy. This leaves the UK Prime Minister, Keir Starmer, with a dilemma. Who does he build closer trading ties with, the US or the EU?

Simon added:

Keir Starmer’s manifesto states that he will build better relations with the EU. One of the biggest stumbling blocks in the UK’s trading relationship with the EU is the control and administration surrounding the movement of food products. Moving closer to the EU may allow development of a consistent and streamlined food policy which would reduce trade red tape and extra charges.

However, aligning with the US would undermine that attempt, as the EU would be exceptionally resistant to allow US originating food products to ‘seep’ into its marketplace, resulting in the administrative burden on food movements being cemented in for longer.

But ‘Refusing’ the US may result in UK exporters being subject to US tariffs on their products. The US is the largest individual trading partner of the UK trading with roughly 30% of our total exports going to the US and the US exporting 10% of its goods to the UK*, so any tariffs would have a big impact on UK trade.”

However, Donald Trump’s tariff rhetoric will likely be watered down by Scott Bessent, who is taking up the reins at the US Treasury. He no doubt realises the shockwaves these proposed actions would have in the US markets.

This doesn’t mean Keir Starmer can relax. As the threat of wide-ranging tariffs will still be used as a tool by Scott Bessent to push Donald Trump’s agenda of controlling the influence China has on global trade and the movement of precursor chemicals, the car raw materials sector in Mexico and also minimise the potential impact of certain digital taxes being considered in the EU and UK.

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If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Simon Sutcliffe using the form below.

*Figures from Dept for Business and Trade – Trade and Investment Fact sheet (United States.)