Ministers urged to offer Trump ‘olive branch’ trade deal, and brace for tariffs

The UK must offer the “olive branch” of a trade deal to Donald Trump’s incoming US government, while forging closer links with the EU to bolster itself against the threat of American tariffs, an influential think tank has said.

Ministers must show they are open to a free trade agreement with the US under President Trump, the Institute for Public Policy Research (IPPR) said in a report examining the Government’s plans for a new trade strategy.

Mr Trump has signalled he is willing to introduce tariffs on goods coming from Canada and Mexico, two of the US’s biggest trading partners, as well as China, in a bid to protect America’s homegrown industries.

In recent days, the president-elect has spoken of establishing a new US government agency tasked with collecting revenue from tariffs.

Borrowing costs

Financial markets around the world have started to react to the possibility the trade taxes could be applied more widely, which is believed to have influenced a spike in Government borrowing costs in the UK.

The IPPR warned the Government must strengthen UK trade defences in the event of a trade war with the Americans, including through a new legal mechanism which would enable Britain to apply counter tariffs on US goods.

Ministers must also seek to renew trade ties with the European Union, the report says, calling for the Government to negotiate a veterinary deal with the bloc, as well as an agreement to remove trade barriers for goods such as electrical equipment, toys and pharmaceuticals.

The think tank has close links to Sir Keir Starmer’s Downing Street, with several senior figures at No 10 having joined the Government from the IPPR.

Marley Morris, associate director at the IPPR, who authored the report, said the time was “ripe for a new UK trade strategy”.

His report said the strategy, currently being planned by the Government, should be tilted towards “green, inclusive growth” which will benefit the UK’s left-behind regions, as well as the prosperous South East of England.

Challenges

The IPPR researcher added: “The challenges are stark: declining goods exports, damaging barriers with the EU, and a turbulent global economic landscape.

“But a new strategy should help develop a new programme of export support, rebuild UK-EU trade relations, and modernise our approach to trade agreements.

“The new Trump presidency is particularly delicate for the UK. The Government will need to on the one hand offer an olive branch by signalling appetite for an ambitious trade deal, while at the same time strengthening the UK’s trade defences to brace for a potential tariff war.

“With the right focus on boosting green growth, securing economic resilience, and rebuilding vital relationships, the UK can turn the tide and reclaim its place as a leader in global trade.”