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Keir Starmer declared yesterday that we’re now living “in a completely new world.” He’s not wrong; Donald Trump has cut to shreds the established economic order and flung the pieces into the air. At this stage, where those pieces will land is anyone’s guess.
So, Starmer is right to sense a moment. But what will he do with it? The government’s immediate response to the tariffs was the correct one. Knee-jerk retaliatory measures would have been disastrous, and Starmer’s talk of “cool heads” and a “measured response” set the right tone and reassured businesses that he wasn’t about to pursue his own “Love Actually moment” – despite calls from some politicians who ought to know better.
Ministers might say that “all options are on the table” but there’s only one real option they’re after; a trade deal with the US that takes the sting out of the tariffs. Trump is openly revelling in the fact that governments are queuing up to negotiate with him, but should the UK get its hopes up? Trump doesn’t appear to be in the mood to dish out favours.
Besides, even if the UK does strike some form of new economic arrangement with the US, we’re still going to be at the mercy of global economic headwinds – and there are plenty gaining strength, even if Trump ever rows back from the worst excesses of his tariff experiment. Friction is being introduced into the global economy, from supply chains and trade routes to capital allocation and market integration, the consequences of which will be lower global growth and greater economic stress. These forces will hit the UK regardless of whether we negotiate our own way out of the tariff trap.
This leads us to Starmer’s long-term challenge; what kind of country are we going to be? What place will we occupy in this stark new world?
My fear is that the Prime Minister will learn the wrong lessons from this crisis and draw the wrong conclusions. He talks of an “active state” when he should plan for a leaner one. He fetishises industrial strategies when he should focus on easing the burdens on businesses across the board. His view is “cometh the hour, cometh the government” – that a crisis of this nature calls for more interventionist policies. At this critical time, such an approach would be a mistake.
