UK's pitiful tariff response: Counting on Trump's 'good nature' was always going to be high risk, says ALEX BRUMMER

The thought of Business Secretary Jonathan Reynolds making a deal with the billionaire hyenas in Donald Trump’s trade and economic team will not fill anyone with confidence.

The Labour apparatchik tried to explain, on Radio 4, why the country should be grateful for an increase in the minimum wage.

His narrative was risible when council taxes, energy bills, water rates, the TV licence, mobile subscriptions and the cost of first and second-class stamps are surging. 

The best cheer Reynolds could offer was three reductions in the bank rate since July 2024. 

He neglected to say the Bank of England is independent of government and that UK rates at 4.5 per cent greatly lag the 2.5 per cent policy rate in the European Union.

Reynolds’s track record on negotiations with the rich and powerful is not reassuring. He faces ongoing difficulties with financially driven foreign ownership at Thames Water and British Steel.

Despite this, the Business Secretary signed off the £3.6billion sale of the Royal Mail to Czech Sphinx Daniel Kretinsky.

Keir Starmer and Reynolds have been confident that they can extract a trade deal from Donald Trump. Britain calculated that humouring Trump is preferable to a fight it cannot win. 

The UK’s approach is in sharp contrast to newly installed Canadian Prime Minister Mark Carney, the former Bank of England governor, who has chosen to make anti-Trump rhetoric the centre piece of his election campaign. His rejection of American imperialism is very different to Britain’s grovelling.

The UK’s approach to Trump is to argue that we are not much of a threat. Statistical differences mean the US claims a goods trade surplus with Britain. UK Trade and Investment data shows the opposite. 

Moreover, Britain ran a substantial services surplus of £67.5billion in the year to June 2024. One imagines that, by now, the Trump trade team will be aware of what will be perceived as unfair competition.

Reynolds argues that the framework of an agreement is in place. The UK may suffer on Trump’s ‘Liberation Day’. Yet there is surprising optimism that the 25 per cent tariff on cars and 20 per cent steel tariff will be swept aside rapidly.

The price for Britain’s suffering high streets and retail parks of a tariff peace will be severe. The proposed accord envisages sweeping away the digital services tax on firms such as Amazon.

At present, the levy raises up to £800million a year and is an attempt to rebalance the way that big tech avoids other UK charges, notably business rates.

A second undertaking being made by Labour is light touch regulation of AI. That is a blank cheque for the moguls of Silicon Valley to use artificial intelligence to override the copyright, TV, film and music rights of Britain’s great creative industries.

Reynolds and Trump have taken to calling this negotiation an ‘economic deal’. They carefully sought to keep contentious items, such as the export of American chlorinated chickens, off the agenda.

Britain’s supine approach means that, for the moment, reciprocal tariffs – as

proposed by Brussels – are off the table. Brexit has given the UK power to carve out its own approach. But as other nations around the world are learning, to count on the ‘good nature’ or logic of Trump and his mercurial acolytes is high-risk.

Sauerkraut conquest

Some years ago, a boss of Sainsbury’s confidently told me that the German no-frills grocers Aldi and Lidl offered no long-term threat to UK incumbents.

Like other upstarts such as Kwik Save they would not be able to withstand the competition. 

He could not have been more wrong. Together, Aldi and Lidl have grabbed 18.8 per cent of the UK food market and, if they were one company, would be second to Tesco – leaving Sainsbury’s et al in the dust, according to Kantar research data.

One factor encouraging explosive German growth are the struggles of Asda and Morrisons under indebted private equity ownership. 

Despite aggressive price cutting, Asda’s market share has dropped 5.6 per cent to 12.5 per cent over the last year. Morrison, with its farm-to-fork supply chain, is holding its own. 

Quality and innovation still are appreciated, and M&S grocery sales soared 13.1 per cent last month. That doesn’t include online Ocado baskets. Impressive.