The UK narrowly avoided a more devastating trade war with the US, thanks to a skilled negotiating team led by Keir Starmer and Varun Chandra.
When Jonathan Reynolds gathered with officials around the large television screen in his office to watch Donald Trump unleash his global trade war, he knew little more than anyone else about what was to come. It was Wednesday night and the US president was about to upend a century of global trade with the imposition of sweeping taxes on US imports from around the world.
Trade wars have significant consequences for global economies.
Tariffs imposed by one country can lead to retaliatory measures from other nations, resulting in a cycle of escalating protectionism.
This can disrupt international supply chains, increase production costs, and ultimately lead to higher prices for consumers.
According to the World Trade Organization (WTO), trade tensions between major economies have decreased global trade volumes by 1% since 2018.
The effects of trade wars are far-reaching, affecting not only businesses but also individual livelihoods.
The expectation in government was that the UK would be hit with a 20% rate, which the Treasury watchdog had warned could wipe 1% off UK GDP. However, Trump‘s tariffs revealed a more nuanced approach than initially expected. The UK‘s rate was 10%, lower than the 20% rate for the ‘EU‘ – but the same baseline as the US had imposed on countries including ‘Brazil‘ and ‘Afghanistan‘.
Within minutes, Downing Street described this as a ‘vindication‘ of Keir Starmer‘s approach. When we heard it was a flat 10% there was some relief because it could have been so much worse. It also meant that they were true to their word about where we stood. That trust will be really important going forward.
Keir Starmer is a British politician serving as the leader of the Labour Party and the Leader of the Opposition in the UK Parliament.
Born on September 2, 1962, he was educated at Cambridge University and later became a lawyer.
Starmer has been a Member of Parliament since 2015, representing the constituency of Holborn and St Pancras.
He succeeded Jeremy Corbyn as Labour leader in 2020, promising to restore the party's credibility and appeal to a broader audience.
The UK government had developed a defensive strategy that revolved around building a strong relationship with Trump‘s White House, despite clear political differences. This approach was based on the understanding that the US would include VAT in their calculations, but Starmer made the case against this directly and publicly when he visited the White House in February. ‘We were able to talk them down,’ a source said.
Trade talks between the UK and US began soon after Trump‘s inauguration, with the goal of agreeing a relatively narrow deal focused on advanced technologies. The two key figures leading the negotiations are Reynolds and Varun Chandra, a corporate strategist turned senior No 10 aide known as the prime minister’s ‘business whisperer‘.
Officials have been impressed by how Chandra has navigated the US administration. He just gets them, and they get him. The talks have been much more corporate in tone than trade negotiations usually are. That’s his world.
A senior trade department official, Kate Joseph, and Starmer‘s economic international affairs adviser, Michael Ellam, have been working behind the scenes at home to get the Whitehall machine ready. Multiple scenarios were drawn up depending on what tariff regime Trump imposed.
Initially, the UK side was hopeful a deal could be done that would secure a carve-out from tariffs before they were announced on 2 April. Government sources cited Trump‘s pledge to ‘be nice‘ to countries that had balanced trade with the US. However, all that changed on Thursday 27 March, less than a week before Trump‘s announcement, when UK officials were told by US contacts that ‘world tariff day means world tariff day‘.
The British negotiating team understood they would be in the ‘friendly’ camp, but had no idea what that would actually mean. They spent the weekend finalising their scenario planning for all potential outcomes.
UK negotiations refer to the diplomatic efforts between the United Kingdom and other countries, particularly the European Union, regarding Brexit.
The process began in 2016 following the UK's decision to leave the EU.
Key issues include trade agreements, border control, and regulatory alignment.
The UK has held numerous rounds of talks with the EU, with several extensions granted due to ongoing negotiations.
As of 2022, a post-Brexit agreement remains pending, with both parties seeking mutually beneficial terms.
As the tariffs come into force on Saturday, Trump‘s team may have the bandwidth to return to trade talks with the UK – potentially early next week. These would initially take place remotely but could quickly return to face-to-face.
