Trump has handed Britain a Brexit dividend – now let's exploit it
As Donald Trump unveils what looks like a permanent set of tariffs on imports into the American market, one point is absolutely clear: Britain's 10pc rate is now the best deal in the world. We may have got there as much by accident as design, but that is surely irrelevant now. The real task is to work out how to seize a permanent cost advantage – and use it to rebuild British manufacturing.
It turns out that tough negotiations and threats of retaliation didn't do much good. Mark Carney, the prime minister of Canada, may have been elected to stand up to Trump, but he has landed his country with a 35pc tariff rate in its biggest market. With a quarter of Canadian GDP dependent on exports to the US, we will see how that plays out, but it is unlikely to be good.
The EU may boast about how it is a regulatory and negotiating superpower, but Ursula von der Leyen, the European Commission president, has only managed to get a 15pc rate in a deal that François Bayrou, the French prime minister, described as a 'humiliation' for the bloc.
With a €157bn (£136bn) trade surplus at stake, that is not likely to work out very well either. French wine and spirit makers are already reduced to begging for an exemption, while Emmanuel Macron has laughably told his cabinet that the bloc ought to be 'feared' (by whom?). The Irish pharma industry is about to be incinerated and the German auto giants will soon be scouting for factories in Alabama and Texas. The new regime will be a disaster for Europe's already fragile economy.
By contrast – and we should give credit where it is due – Sir Keir Starmer and Lord Mandelson, Britain's ambassador in Washington, have managed to secure a trade deal that now looks as if it will be the best in the world. British exporters will permanently trade with the US on better terms than anyone else in the world.
We all know how we got there: outside of the EU, and with trade roughly in balance, we were able to get favourable terms. It may not have been what people envisaged when they voted for Brexit, but that hardly matters now. In reality, it has turned into a diplomatic triumph.
No one should kid themselves that it doesn't matter. A 5pc permanent cost advantage in the world's biggest economy is significant. Let's keep in mind that, on current growth projections, the US market will just get more and more dominant within the global economy. It is already 25pc bigger than the EU and with America expanding at 3pc annually and the EU at zero, that gap will only get wider and wider.
Likewise, the tariffs look permanent. For all the predictions of disaster from mainstream economists, inflation has remained modest in the US, growth is strong, investment is flooding into the country and it is bringing huge revenues into the Treasury, with July breaking all records.
Tariffs accounted for $150bn (£114bn) in extra cash for the American government so far in 2025. Why would any president abandon a policy that is working that well? In reality, the tariffs are here to stay, and so is the long-term competitive advantage that we have just locked in.
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