For all the comedy drama of Donald Trump’s Scottish visit, the implications for UK Plc and London as its fulcrum are positive. Or rather, are a lot less negative than the EU-US trade deal, which left the EU Commission boss Ursula von der Leyen looking as if she had swallowed a particularly unappealing haggis.
It is also a moment which consigns the post-Brexit era to history — not because it has been healed, but because the major impacts of the tariff era are more far reaching. And because, bluntly, the damage to Europe from a US president remaking the global trade order by fiat is much more harmful than the dents to the UK of leaving the European Union.
Not so long ago the single market’s bargaining might as a trade block vis a vis the US was part of its competitive raison’ d’être and constituted a reason the UK was mad to leave it in the 2016 referendum. But now it finds itself saddled with a baseline of 15 per cent tariffs in dealings with the US while the UK landing zone is around 10 per cent. And without a substantial growth advantage over the UK — the Eurozone as a whole grew by a measly 0.1 per cent in the last quarter — that means, as one senior finance minister told me at a downbeat business gathering in Berlin recently, “our bruise is being pressed a lot harder than yours”.
The reaction since Air Force One jetted home has gone from relief that a deal was done — which let’s not forget avoided the initial 30 per cent tariff threat or retaliation the EU was in no position to conduct — to misery at the fallout.
It is a thoroughly bad deal for the EU, which even the usually staid German Chancellor, Friedrich Merz, said would “substantially damage” his nation’s finances and fuel inflation.
The French prime minister François Bayrou described it more forcefully as “submission”. Spain’s PM Pedro Sánchez said he would back it “without enthusiasm”. Signing it has weakened Von der Leyen as the “Ice Queen” of Europe.
The first Brexit era has now come to an end — replaced by the more complex dynamics of the US tariff era
But the tariff angle may not be the worst of it. Josep Borrell, the block’s former High Representative for Foreign and Security Affairs, sent a verbal rocket on X towards Von der Leyen on Wednesday morning, saying that “bad strategy leads to bad outcomes”.
Borrell is not the only one to highlight that the agreement to buy more weapons, oil and gas from the US depends on individual companies and governments. European leaders are scratching their heads as to how this volume of imports could be achieved. Increasingly, Von der Leyen is telling half-truths or using wordplay to ward off a sense of panic across Europe at the impacts of the deal. She spoke of replacing Russian gas and oil with “significant purchases of US LNG, oil and nuclear fuels”.
To hit the amount pledged, the EU would have to triple its reliance on the US — neglecting cheaper partnerships with European countries like Norway.
Europe’s embattled car-makers are stalling too: the 15 per cent tariff makes their products far less competitive. The UK has a modest exposure here, largely through luxury and classic car exports to America — but 10 per cent on this sector and aerospace is a relative boost.
No one can rejoice at increased tariffs. But the big problem for the EU deal, reflected by country leaders and financiers, is that it is based on commercial companies following an edict over which the bloc has no control and which could leave the EU looking more bureaucratic than effective.
The end effect is that Von der Leyen delivered a “hail Mary pass” which will undermine her own authority, on the calculation that any deal to avoid a tariff onslaught was better than none and that the details can be blurred later.
That, combined with greater relief for the UK steel industry and a 5 per cent general gap now opening up in import levels, is an opportunity for the UK. It is also a chance to escape the “Brexit trap” of being disadvantaged in comparison to the EU, if the Starmer government can at least mitigate trade frictions with Europe — while keeping the small Trump dividend (or at least, having the UK bruise more lightly pressed.)
The first Brexit era has now come to an end, replaced by the more complex dynamics of the US tariff era. Yet as tempting as schadenfreude is, the UK can only benefit from a marginal advantage over the EU if it can produce more of the goods and services America wants.
This is already an area of brisk business — £137bn in exported services in 2024 (up around 8 per cent on the previous year). “Brit-shoring” means it is cheaper for US companies to hire UK-based consultancy, telecoms, backend finance and business support than their domestic equivalent. It even applies to prominent US media websites setting up operations in London.
Talking this week to a visiting tech titan summering luxuriously in London (a kind of social Brit-shoring), his reluctance to invest in London turns on a lack of confidence in the wider growth outlook.
Britain does not “score” for him as having a clear reason that investors should engage or enough companies that can scale. That is not a problem a stroke of the Trump pen can resolve. But less pain than your neighbours is better than the reverse in the bumper bust-up that is the second Trump epoch.
Anne McElvoy is host of the Politics at Sam and Anne’s podcast from Politico/Sky
