Sir Billy No-Mates

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It’s unclear exactly what Trump is hoping to achieve by imposing tariffs on all good imported to the US. Sometimes he implies that it’s a temporary move to restore what he calls 'fairness', whilst at other times, he implies that it’s intended to be a long term replacement for income tax – a way, in effect, of transferring taxation from the income of the richest to the expenditure of the poorest. He either doesn’t understand, or is pretending not to understand, what tariffs are or how they work. My money’s on the former; partly because it’s the simplest explanation and Occam’s Razor applies, and partly because anyone who thinks that tariffs can be applied to smuggled fentanyl is clearly demonstrating his lack of understanding. Whilst the idea that smugglers would stop at the border to fill in forms and pay the tariff is attractive, its relationship to reality is somewhat distant.

The underlying statistics on which the tariffs are based are also questionable: the idea than an island group only inhabited by penguins and seals is exporting quantities of “machinery and electrical” goods to the US is fanciful at best. Whoever produced the figures for his show yesterday clearly didn’t apply any sort of ‘sense check’ to the numbers before letting His Orangeness loose to announce them. The calculation of the total value of tariff and non-tariff barriers is opaque, to say the least, but then basing decisions on arbitrary figures pulled out of thin air is his normal modus operandi.

However flimsy the factual basis, however arbitrary the decisions taken as a result, the fact is that the tariffs are going to be in force (until he changes his mind, which could be tomorrow - or even later today - based on experience to date), and the question is about how to respond. The main losers, in the immediate short term at least, will be US consumers. Even if the companies importing goods from elsewhere succeed in ‘persuading’ their suppliers to drop prices, or themselves decide to somehow ‘absorb’ part of the increase, the bottom line is that, for US consumers, prices of imported goods will rise. That isn’t a bug, it’s a feature; intended to encourage more domestic production. It might even work, but not on a large scale in the timescale of the current Trump presidency. Investment decisions required to build domestic capacity to replace imports aren’t going to happen overnight. To the extent that US demand for their products reduces or they feel obliged to reduce their pre-tariff prices, companies in all of the countries hit by tariffs, as well as their employees, will also be losers although, again, the timescale of that happening depends on how inelastic the demand for their products is.

For all the same reasons, it follows that the main losers when countries impose retaliatory tariffs will, in the short term, be the consumers in those countries; the process is a reciprocal one. For that reason, and despite all the natural desire to hit back at the person and country responsible, the immediate reaction of Sir Starmer (which is that he should not react immediately) is probably sensible as far as it goes. If and when it becomes clear that Trump’s approach is giving some US companies either individually or by sector an advantage over UK companies, that is the time to respond forcefully. Protectionism can also be reciprocal, another of those unfortunate facts which Trump seems incapable of understanding.

The bigger concern with Sir Starmer’s response is about whether trying to ingratiate himself and the UK with His Orangeness is the best way to deal with a bully. Being best mates with a bully might buy some relief in the short term, but it facilitates the bullying of others and, in the long term, the bully will always come back for more. Sir Starmer’s apparent unwillingness to collaborate with others rather than seek advantage over them is unhelpful, and fails to acknowledge that, however important the UK might have thought itself to be in the past, the future of these islands is inevitably linked to that of the rest of Europe. His reluctance to accept that a choice has to be made is itself making the default choice of sucking up to the bully. Talk of a reset of the relationship between the UK and the EU is just hot air when the government is seeking to negotiate an advantage for itself over the EU partners. Pretending to be everyone’s best friend is the best way to end up friendless.