Thank you, Donald Trump, for a truly dreadful trade deal
'Dear Donald, I write to thank you once again for the generosity you have shown to the UK in imposing an additional tariff of 10pc on British exports to the United States.
As a nation, we are hugely grateful for the leniency you have shown us, and I look forward to expressing my thanks in person when you do us the honour of a state visit this September.
You can expect the full works – trumpets, carriages, banquets and much, much more. A kowtow of truly epic proportions in full and proper recognition of the damage you are about to inflict on the UK economy is promised.
I have to say that our consummate schmoozer, Peter Mandelson – you know, the one whose accent you like so much – has done us proud in toadying up to you. His approach would have done credit to Uriah Heep, a character from our very own Charles Dickens in case you haven't heard of him.
But it's more than just flattery. We genuinely think of you as the most consequential president since George Washington, and greatly appreciate the many 'nuances' with which you so cleverly imbue your Truth Social posts.
I struggle with them, myself, but then I have Peter to tell me what you are really saying. He's been quite a hit on the Washington scene, I hear. There is no occasion he will not attend, and no audience his fawning cannot charm.
I'm sure you can appreciate the irony. It's admittedly required quite an effort to pass off a trade deal that makes it harder and more expensive to export to the US as a triumph.
But this was the first unarguable 'Brexit dividend' the UK has been able to achieve since leaving the European Union, and it is me and Peter – both arch-Remainers – who have been able to deliver it.
I'm not allowed to say this, because of my reset in relations with the EU, so please keep it confidential. But I'd be much obliged if you didn't hold back on the tariffs you are about to impose on the EU.
As you might have read, I'm in all kinds of trouble on the domestic front – which makes my relationship with you all the more important. It is vital that I am seen to get less of a bad deal than the EU.
The markets seem to think that despite your threats, the EU will end up with something not so far removed from our own miserable arrangements – minus the cars and aerospace concessions of course, for which again many thanks.
You don't need me to tell you that this would not look good from my perspective. And by the way, you should not trust Maroš Šefčovič, the EU trade commissioner. He's a one time 'commie', you know, who studied in Soviet Russia 'to deepen his knowledge of Marxist Leninism'. Not even Angela Rayner was ever that Left-wing.
Šefčovič seems to think he's about to sweet talk your people into an acceptable trade deal. Please say this is not true.
Also don't trust Italy's Giorgia Meloni. Take it from me, she's much more interested in Elon than you.
But as I say, I very much welcome your determination to wreak havoc on world trade, and feel 100pc confident that there is method in the seeming madness, even though I'm struggling to see it.
Affectionately yours, Sir Keir.'
OK, so that's enough gratuitous imagining from me, though I fancy it may not be a million miles from the truth. In any case, it is indeed surprising that the markets are apparently so relaxed about the latest turn of events.
The 30pc tariff on the EU Mr Trump announced over the weekend is bigger than the one he proposed on his so-called 'liberation day' in April.
Warnings from the American business and financial establishment that his tariffs would prompt a recession caused Mr Trump to 'pause' their implementation to allow for talks.
Markets assume that the latest assault will similarly end in compromise. A word of caution – this may be no more than wishful thinking.
As it is, there is little justification for the actions the Trump administration is taking against Europe, or in seemingly lesser form against the UK, for that matter.
As of 2023, the EU's average trade-weighted tariff was admittedly a little bit higher than the US, according to World Trade Organisation data – 5.1pc against 3.4pc. It was also quite a lot higher for agricultural products – 12.2pc against 4.8pc. The numbers for the UK were pretty much the same as for the EU and haven't diverged much since.
It may also be true that EU non-tariff barriers to trade are higher – it depends on what sectors we are talking about.
Yet the trade imbalances Trump complains of have, in truth, got very little to do with tariffs and other barriers to trade. Rather they are the result of structural differences in the two economies, and in particular the propensity of the US to consume a lot but save and invest too little. In the EU it is the other way around – it consumes too little and invests too much. The same is true of China.
For the UK, which is structurally quite similar to the US in its tendency to consume beyond its means, and where trade in goods with the US is roughly in balance, there is even less of a case for applying punitive tariffs.
Sadly, rational thinking doesn't come into it. We can complain all we like, but Trump stood for office on a protectionist platform, so we should not be surprised that he is now being as good as his word and imposing it.
Rather, we should seek to lessen the impact as much as possible and hope that Trump or his successors eventually see the light. Tempting though it is to respond in kind, it's not going to do any good. On the contrary, it threatens only to make a bad situation even worse.
It is positively insulting that Trump should treat some of his closest and most loyal allies like this. But it is what it is. And as long as it is possible to salvage at least something from the wreckage, this is the path we must tread.
Not to trade at all with the US, which is where Europe would end up if it followed a tit-for-tat, beggar thy neighbour approach, would be deeply damaging for the Western alliance.
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