Europe in Trump's Tariff Sight, Why Can Britain Survive?

WASHINGTON DC, TUESDAY — Although Europe is in the crosshairs of President Donald Trump's tariff policies, the United Kingdom is likely to be excluded from Washington's target. This is because the US and the UK both record trade surpluses with each other due to differences in methodology.

The US imposed import tariffs on Mexico, Canada, and China on Saturday (1/2/2025). Two days later, Washington, Ottawa, and Mexico City agreed to postpone the trade war. However, Trump has already aimed his tariff bullets at the European Union.

When journalists asked about the imposition of tariffs on the United Kingdom on Sunday (2/2/2025), Trump said he would still observe the development of the situation. He confirmed that he would impose tariffs on the European Union first.

"We'll see what happens. But, the European Union is really outrageous. The UK is indeed outrageous, but I think that can be resolved. However, the European Union is cruelty, (related to) what they have done," said Trump.

Trump explained that he has a good relationship with the Prime Minister of the United Kingdom, Keir Starmer. They have met several times and have had many phone calls. Both are looking for ways to balance the budget.

On Monday (February 3, 2025), a spokesperson for the British government stated that the US is an indispensable ally. The UK also regards the US as its closest trading partner.

"We have a fair and balanced trade relationship that benefits both parties across the Atlantic. We look forward to working closely with President Trump to continue building the UK-US trade relationship for the benefit of the economy, businesses, and the people of the United Kingdom," said the spokesperson.

Trade in goods and services between the United Kingdom and the United States amounts to hundreds of billions of dollars each year. The United States is the United Kingdom's largest trading partner as a single country, although trade volume with the EU is larger as a single bloc. The United Kingdom is the United States' fifth-largest trading partner after Canada, Mexico, China, and Germany.

Quoted from the BBC, economists warn that the UK could be affected by the imposition of tariffs both directly and indirectly. The impact could be felt through slower growth in some of the UK's important trading partners. Industrial exports could shift from the US to the UK market, which would have an impact on financial markets, including the possibility of increasing borrowing costs.

However, the two countries use different methodologies in their respective national statistical agencies. Therefore, the US and UK both report trade surpluses over each other.

The UK Office for National Statistics (ONS) reported a trade surplus of £71.1 billion ($88.33 billion) in the third quarter of 2024. Meanwhile, the US Bureau of Economic Analysis (BEA) noted that the US had a trade surplus of £15.1 billion for the same period.

Total trade between the two countries was 294.1 billion pounds (365.3 billion US dollars) for the same period.

Both countries adhere to the latest International Monetary Fund (IMF) standards for measuring trade. However, their statistical agencies apply the standards at different speeds. This affects the measurement of trade in services, in particular, because different definitions can produce large differences in the data.

For example, in 2020, the ONS said differences in how it measures financial market trade and financial institution services contributed to a £10 billion ($12.42 billion) gap with BEA data. “Measurement of trade flows and relationships is complex. Asymmetries are an inevitable consequence and can affect all data compilers,” the ONS said last month.

The ONS data also shows that services make up the bulk of UK trade, such as exports of accounting and law firm services. US tariffs only apply to goods trade.

However, the US Customs and Excise Department presents very different data. According to the agency, capital goods, excluding cars, are the main US imports from the UK.

Starmer and his ministers have praised Trump since his election, stressing how much Britain imports from the US and hoping to avoid tariffs at a time when the UK economy is struggling to grow.

Starmer is in a difficult position. In addition to preventing tariffs on the UK, he is also trying to rebuild relations with the EU after Brexit, the UK's years-long row over its departure from the bloc. The UK left the bloc in order to boost its sluggish economy.

Starmer wants to remove some of the red tape and other barriers to trade between the UK and the EU caused by Brexit. But he has no plans to rejoin the EU's customs union or single market and has rejected a deal that would allow young people from the UK and EU to live and work in each other's territories for a limited period.

To keep domestic political turmoil over Brexit at bay, Starmer wants relatively modest changes, such as making it easier for artists to tour and for professionals to have their qualifications recognised. He is also seeking closer cooperation on law enforcement and security.

EU politicians have welcomed Starmer's more flexible initiatives than his conservative and Eurosceptic predecessor. But the EU wants concrete proposals and inevitable compromises from the UK. The UK and EU will hold a leaders' summit later this year.

On Monday (3/2/2025), Starmer visited Brussels, Belgium. He became the first British prime minister to attend an EU leaders' meeting since Brexit in 2020. He held talks on a new UK-EU security pact.

In a press conference, Starmer was asked whether he was trying to tone down his EU relations efforts to please Trump. He said the UK would not choose between the EU and the US.

“Both of these relationships are incredibly important to us. We don’t choose between them, but historically that’s the position the UK has been in for decades,” Starmer said.

On the tariff issue, Starmer said the situation was still in its early stages. “I think the most important thing is an open and strong trading relationship. That was the basis of my discussions with President Trump and I know that intensive US-EU discussions are planned,” he said. (AP/Reuters)