Donald Trump has made tariffs one of his defining priorities early in his Presidency. This has already damaged the global economy and will only continue to hit growth in countries around the world over the coming years.
What’s worse, many countries are responding to this damage in kind. China has already levied retaliatory tariffs on the US and the EU is seeking to do the same. This will just trigger a further heightened reaction from the US.
It is an economic doom loop, which we don’t have to partake in.
Fortunately, Britons can take some solace in the fact that their government is taking a different approach.
The Prime Minister and his cabinet colleagues have been hesitant to even suggest they will retaliate, and for good reason. They understand that tariffs are an act of pure economic self-harm.
They are a tax paid by ordinary people through higher prices. Trump likes tariffs because he thinks they put American companies at an advantage over foreign companies.
Technically they do, but only by imposing artificial costs on foreign companies (which are ultimately mostly paid by people in the home country, with businesses in a foreign country only acting as intermediaries).
Responding to tariffs imposed by another country by imposing our own tariffs is like seeing someone shoot themselves in the foot and then deciding to pick up the gun and take aim at our own shoes. Starmer and Reeves deserve credit for leaving the gun in the holster.
And today they have gone further in the right direction, announcing a new trade deal with India.
The deal will cut tariffs and trade barriers on a range of goods, increasing trade between the two nations and lowering prices for Indian and British consumers.
The Government claims that the deal will add £4.8billion to UK GDP a year in the long run – welcome news to help balance out the damage being done elsewhere.
This deal represents what politicians like to call another ‘Brexit benefit’.
Now the UK can set its own trade policy, not only has the Government been able to avoid being pulled into a painful trade war alongside the EU, it has also been able to sign a new deal with India that will boost our respective economies.
But we can do more. Starmer must remember that trade does not necessitate deals.
We don’t need the permission of another country, neither as part of the EU or as part of a negotiated trade treaty, to cut tariffs and trade barriers.
We can liberalise trade all by ourselves and make the life for British businesses and British consumers easier, and cheaper.
