In a world where Donald Trump’s tariffs and trade wars make everyone a loser, are there any winners from his latest deal, sealed by a handshake with the president of the European Commission, Ursula von der Leyen, in a ballroom at one of the US president’s Scottish golf courses, of all places?
One very clear loser is Von der Leyen herself. If body language is anything to go by, she looked like she’d been badly bullied by the Big Orange Man – and, truthfully, so she had. In her own clipped remarks, she admitted that a reduction in tariffs to 15 per cent, while “not to be underestimated”, was “the best we could get”.
Emmanuel Macron has declared the US-EU trade deal a “dark day” for Europe – and you can understand why.
A general tariff level of 15 per cent – better than the 20 per cent proposed by Trump on his infamous “Liberation Day” in April, and much better than the 30 per cent he was threatening not long ago – is still prohibitive. It is certainly way above the 2 to 3 per cent levels that most EU exporters used to face.
A trade war has been avoided, but this looks like the kind of deal the Americans have forced on the likes of Vietnam or Indonesia. So it is something of a humiliation for the mighty European Union, a global trade superpower.
The feeling in some parts of Europe must be that if Von der Leyen had played hardball like the Chinese, a more evenly balanced and more advantageous relationship could have been reached in the long run. We will never know the truth about that.
For European pride, and for many of the continent’s great industrial concerns, the deal is disappointing, and will be expensive – the Volkswagen group is just one business to have spoken out. But for European consumers, it is surely good news. They will be able to enjoy cheaper imports from the United States; it is American customers who will have to pay more for their French wines and Italian sports cars.
Could it be that the EU’s trade deal – which Trump has, well, trumpeted as the “biggest ever”, and whose biggest “win” is the removal of a threat to raise tariffs to 30 per cent later this week – is marginally worse than the one Keir Starmer made with Trump in May?
Britain’s trade deal lowered tariffs on UK goods imported into the US to 10 per cent, and imposed a lesser, 25 per cent tariff on the UK steel industry, with room for further concessions, while the 50 per cent “worldwide rate” will remain for the EU.
For those now cheering this as a rare Brexit benefit, it is a hollow victory. For the concessions to Britain are so minor, they cannot hope to make up for the ground lost since Brexit – essentially, a GDP loss in excess of 5 per cent.
And we’re not out of the rough, by any stretch. As Starmer meets the US president for further trade discussions at the Trump Turnberry golf course, he will be acutely conscious of his counterpart’s unpredictability. Starmer has milked the modest concessions he managed to wangle, particularly on cars and food standards, but much remains vague and is far from nailed down. The greatest danger is that the fuzzy commitment on the part of the UK to improve the trading environment for the US pharma groups will eventually mean an enormous increase in the drugs bill for the National Health Service, which it can ill-afford.
Trump also omitted virtually the whole of the service sector from his UK deal, where the British actually enjoy a surplus, which is great until he decides otherwise. There are no legally binding rules here.
The world economy remains highly interdependent, and globalisation, while receding, cannot sensibly be ended, as even Elon Musk tries to argue. All barriers to trade harm the country that erects them both directly and, in their depressing effects on world growth, indirectly. Consumers are charged more, on a highly regressive basis; companies are forced to pay more for imports, and be less cost-effective; and competition and dynamic structural change are deliberately impeded.
Whatever the details of the individual deals countries are trying to strike with one another, tariffs make us all poorer in the long run.
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