Only Donald Trump can rescue Rachel Reeves from her own folly

Telegraph

28-03-2025

Rachel Reeves is in a dreadful mess of her own making. Since she entered No 11, virtually every data point has worsened as a direct result of her blunders. Taxation and spending are on track to reach record highs. Business confidence and growth forecasts have nosedived.
Her predictable excuse is Donald Trump. His tariffs hadn't been announced when she delivered her Spring Statement, and the deterioration of the economy had nothing to do with his actions. Still she pointedly lamented the uncertain global outlook and 'unstable' trading patterns.
So it is a great irony that Trump could be the one to save her from her current predicament. This is for one simple reason: the only way out for Reeves is a trade deal with the US.
This may sound counter-intuitive given Trump's 'Liberation Day' on April 2 might see his administration impose 25 per cent tariffs on global and UK automotives, crippling what remains of our car industry.
This would hand Labour the excuse it has long desired to pursue closer economic links with the EU, reducing 'friction' with our 'biggest trading partner'. But Keir Starmer will not renegotiate our relationship on better terms: if the EU believes we are desperate, it will revert to its old tricks and seek to extract too much.
The combination of a trade war from America and a poor deal with the EU, implying a return to regulatory harmonisation from Brussels, would not just sound the death knell for our economy, but for this Labour Government. Such a scenario would prove extremely fertile ground for Reform.
But there is a way out. Britain could still negotiate a free trade agreement with the US, even if the deadline on cars is missed. Trump-sceptics love to deride the president for his branding of tariff imposition day as Liberation Day. But while the means are undoubtedly protectionist, the ends are essentially libertarian.
Put simply, Trump is trying to beat countries with a stick until they agree to dismantle red tape that is holding back global demand for US goods and services. America is resorting to tariffs for one main reason. Over the past four decades, many countries have followed the US in lowering their tariff regimes, but they have not torn down regulatory barriers, or dealt with anti-competitive distortions.
Trump's masterplan is to create a new 'coalition of the willing', with the world divided into those who welcome competitive dynamism and those who cling to stagnation.
If Britain joins Trump's club, the prize would be huge. Amid the liberalisation of agricultural trade, the cost of the weekly shop could drop, as the price of everything from fruit and (chlorinated) chicken to rice plummets. Sectors, from aviation to finance in the City, would boom. UK defence consultancy firms will rake it in, having unlocked access to million-dollar US public sector contracts.
A new era of innovation will be unleashed, as science and tech are given the necessary nudge to unshackle themselves from the EU's precautionary principle. This is one of the dumbest notions to corrupt Europe in the post-war era, demanding the inventor prove their novel idea is completely safe, rather than requiring blockers to prove it is harmful. It has stifled progress, and entrenched monopolies. The US approach is far better, and has sparked an entrepreneurial explosion in the Silicon Valley and beyond.
A deal will also bring about bonuses that ought in theory to delight the Left. Ending restrictions on GM food would mean no longer depriving the poor of nutritional, cheap sustenance; it would help neutralise the narrative around welfare cuts. Faster growth would boost resources available for health and education.
Shanker Singham, a leading trade expert, has modelled the impact of an EU reset involving dynamic alignment and a 25 per cent US tariff. He found a potential 7 per cent hit to the economy. Conversely, penning a deal with the Americans could yield an 8 per cent boost to the economy. As he says: 'If you are in freefall and someone offers you an arm, you're just going to have to take it.'
It would also be a political gamechanger for Labour. The Tories would find it hard to recover from the humiliating spectacle of the Remainer Labour Party sealing the most coveted of post-Brexit trade deals – one which they themselves dithered over until it was too late.
Reform's grand narrative that 'Britain is broken' would suddenly look miserabilist. Making a virtue of volatility would help Britain to regain its sense of agency. Even technocrats must someday realise that to survive they cannot just navigate the storm; they must learn to surf the wave.
Keir Starmer is rightly talking with the Trump administration about such a deal. Encouragingly, he appears willing to ditch a tax on US tech firms – a sensible move with or without any trade agreement, given the stupidity of the original levy. Many Labour Remainers are beginning to talk like full-fat Leavers. One told me: 'We have to take a more muscular approach to Brussels. They can't get upset with us doing our own deals. We left the EU and they gave us a trade deal that erects barriers to our goods and services.'
Some of the PM's allies fantasise that the UK could thrive as the only country in the world capable of balancing decent relationships with the US, Europe and China. Human rights lawyer Starmer, in his element gallivanting on the global stage, is keen to rebuild the Blairite vision of Britain as a bridge. It is an idea that will have to be redefined in the event of America actually withdrawing from the Continent, potentially destroying Nato, but it demonstrates the breadth of Starmerite willingness.
A bigger hurdle may be the existence of a residue of Remainers militantly opposed to a deal with America. But those close to Starmer say that his greatest strengths are his clear sightedness, his ruthlessness and his unparalleled ambition.
If that is so, it is hard to see how he could pass up the chance to pull off the most astonishing of coups – and finally deliver, if not the Brexit boom that the Tories squandered, at least a remarkable economic comeback.