Rachel Reeves will visit Washington DC in the next few days. Formally, the chancellor is attending the International Monetary Fund’s spring meeting of finance ministers. Informally, she will also be meeting representatives of Donald Trump’s administration to discuss the US-UK trade deal that sometimes appears, like a mirage, in the near future.
Any negotiation with the Trump administration is a fraught affair, because however normal the discussions seem at the level of officials or ministers, they are liable to be upended by the whims of the president and vice-president. In the past few days alone Mr Trump and JD Vance have said contradictory things about how much the president loves the United Kingdom and is hopeful of a deal, while Mr Trump has suggested that the 10 per cent minimum tariff is permanent, and Mr Vance has signalled that any deal would depend on the UK lifting some largely imagined restrictions on free speech.
The “Iron Chancellor” will need nerves of steel to negotiate with such an unpredictable partner, but she seems to be adopting the most sensible approach, which is to extol the benefits of free trade at the same time as emphasising its limits. The position she has set out in recent interviews could hardly be called intellectually coherent, but it may be politically expedient – allowing her both to argue against tariffs and to acknowledge that many people on low incomes in Britain and America feel that global trade has failed to improve their lives.
Hence, she says, “globalisation has changed”, which it has not, really, and that “we’ve got to build a more secure and resilient economy, and that means buying, making, selling more in Britain”.
Those are lines that may go down well with the protectionist-in-chief in the White House, which could help set the tone for Ms Reeves’s discussions.
On the other hand, in an interview on Saturday, the chancellor also gave a robust answer to the question of whether Britain should be willing to engage less with China to placate Mr Trump. She said: “Well, China is the second biggest economy in the world, and it would be, I think, very foolish to not engage. That’s the approach of this government.”
Again, her position is broadly sensible: the UK should trade with China while being cautious about national security and assertive about human rights. Free trade and the national interest are usually the same, but where there is a tension between the two, as in Jingye’s ownership of British Steel, a pragmatic adjustment of the relationship may be necessary.
Mr Trump ought to approve of the British government taking control of a strategic industry, but there is no need for Ms Reeves to try too hard to echo his protectionist rhetoric. A touch of economic nationalism is fine, because it plays well with British voters, and the basic diplomatic courtesies should be observed, but there is no point in seeking to appease Mr Trump because he will do what he wants regardless.
Usually, Mr Trump ends up doing more sensible things than he says he will do. His dramatic “Liberation Day” announcement of tariffs has been watered down with a 90-day postponement and sweeping exemptions.
All Ms Reeves can do is make her case and hope for the best. In the meantime, she must prepare for the worst. Given that the global economic outlook worsened immediately after the Office for Budget Responsibility’s March forecast, thanks to Mr Trump’s declaration of trade war (no matter how much it was soon muffled), she ought to be preparing the British people for further tax rises. Unfortunately, she continued to box herself in in her interview on Saturday, boasting that she had not raised taxes last month, despite the speculation.
More promisingly, however, she dropped a hint in the interview that a deal to reduce trade friction with the European Union will be possible next month: “Let’s just be clear,” she said, “we have exactly the same food and farming standards as the EU.”
This is the sort of thing that needs to be done anyway to raise living standards in the UK.
As well as a US trade deal to mitigate the negative effects of Mr Trump’s tariffs, Ms Reeves needs to redouble her efforts to secure an EU trade deal to offset the damaging effects of Brexit. We wish her as much luck in Brussels as in Washington.
