UK’s Reynolds Warns Against Choosing US Over EU in Tariff Talks
(Bloomberg) -- The UK will have to balance any deal on tariffs offered by US President-elect Donald Trump with wider concerns on how it would affect trade ties with the European Union, Business and Trade Secretary Jonathan Reynolds said Monday.
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Trump will take power in January after winning the US election earlier this month on the back of a campaign in which he vowed to slap tariffs of as much as 20% on all imports to the US, and of 60% on imports from China. Reynolds told a committee in Parliament’s upper chamber on Monday that tariffs on British goods entering the US would be “a difficult thing for us to have to contend with,” while adding that the deeper challenge was how Trump’s presidency might affect the UK-EU relationship.
“The US is a major and important trading partner for the UK, £300 billion ($380 billion) of bilateral trade,” Reynolds told the House of Lords International Agreements Committee. “But compared to the EU with over £800 billion of bilateral trade, clearly if there are things that we are offered or asked to do that would result in an adverse relationship on the European side, we’d have to weigh the consequences.”
Trump’s proposals complicate plans by the UK’s new Labour government to promote growth at home, with economists at Goldman Sachs already downgrading the projected rise in the country’s economic output as a result of his election win. They also present a conundrum for Prime Minister Keir Starmer, who’s seeking to move the UK closer to the EU after years of friction over Brexit, but has also bumped a US trade deal up his list of priorities after the former president secured a second term.
Reynolds said trade negotiators would not be “seeking” to choose between key markets. While the US is the UK’s largest single trading partner, with total trade worth £302.1 billion in 2023, the EU is the UK’s largest trading market, with total trade worth £807.2 billion.
But the return of Trump with his “America first” protectionist stance may force Starmer’s government into examining uncomfortable trade-offs. Economists have speculated that the US may ask the UK, in order to be exempted from any tariffs, to take its side on foreign policy matters or import more of its goods.
That could involve asking the UK to lower its food and agricultural standards, which are currently aligned with those of the EU, to allow greater imports of US produce. The UK’s refusal to do so in the past was a continual point of contention in trade talks with the US during Trump’s first administration.
“Choosing between key markets is not something we would be seeking to do,” Reynolds said. While there would be “offers made to the UK” during the course of trade negotiations, “we will have to see what those offers are,” he added.
Trade consultants have suggested the US may try to offer the UK derogations from unilateral tariffs if it sides with Trump in his protectionism against China. But Reynolds warned that following the policies of a much larger country would be “painful” for the UK. “If there were to be a much wider trade confrontation between China and the West, as a much more globally orientated trading nation the UK would be much more exposed than, say, the US is,” he said.
Starmer on Monday became the first British premier in almost seven years to meet with Chinese President Xi Jinping, as he seeks to forge closer economic ties with the world’s second biggest economy while also acknowledging the importance of challenging China “when necessary” over issues such as Taiwan, Hong Kong and wider concerns over human rights.
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