US President Donald Trump is threatening to launch a very damaging new trade war with the United Kingdom who has been the United States’ historical closest ally.
In a few weeks back, Trump and his allies have issued a series of trade threats to the UK on everything from the future of the Iran nuclear deal to Huawei, to taxes on tech firms.
The threats follow as Britain warm up to divorce the European Union on January 31. The UK will seek a host of new trade deals to balance its new status and it appears Trump intend taking advantage of the country’s vulnerable new position.
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A new levy is designed to target international companies which the UK government believe use their position to avoid tax in the UK.
PM Boris Johnson’s spokesperson told a press briefing this week that these companies, most of which are based in the US, are “undermining public trust and confidence in our economic system.”
However, Trump’s Treasury Secretary Steve Mnuchin responded in Davos this week to what the UK describes as a “proportionate” tax, by threatening a new trade war with the UK over the issue.
“If people want to arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies,” Mnuchin said.
The automotive industry is a major part of the UK’s economy with almost a fifth of overseas sales of UK vehicles going to the United States.
Mr Johnson’s spokesperson actively responded to the threats this week by saying that such a trade war would “harm businesses and consumers on both sides of the Atlantic.”
The UK’s International Trade Secretary Liz Truss was also bullish on the issue on Thursday, saying that the UK’s policy was “not a matter for the US. It’s not a matter for the EU. And it’s not a matter for anybody else.”
Trump has also threatened the UK on security issues.
Trump has warned the UK that the intelligence-sharing agreement between the two countries will be at risk if the deal goes ahead, with US officials warning last week that “Donald Trump is watching closely.”
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That notwithstanding, Boris Johnson is preparing to allow the Huawei deal to continue despite the threats, amid a widespread belief in Europe that Trump’s warnings are a “bluff”.
When asked last week whether he would continue with the Huawei deal, Johnson told the BBC that “the British public deserves access to the best possible technology. If people oppose one brand or another they have to tell us what’s the alternative?”
EU trade commissioner Phil Hogan last week told an event in London that the threats from both Presidents are simply not credible. “I don’t think that will happen at the end of the day. You can call their bluff on that one,” he said.
Johnson last week joined with other European leaders in signing a letter endorsing the current deal, which they see as the best chance of bringing Iran back into the fold and preventing a potentially devastating conflict with the US.
However, threats by Trump to impose 25% tariffs on European vehicles appear to have played a part in forcing those same countries to instigate the disputes mechanism last week, which could ultimately cause the entire deal to fall apart.
Now as Britain prepares to enter new trade negotiations with the US, the threat of more punitive trade retaliation by Trump looms over the UK.
The UK threatens Trump on defence
Responding to the Sunday Times, the Defence Secretary Ben Wallace warned that Trump’s isolationist foreign policy meant the UK was considering drawing back from its longstanding defence alliance with the US.
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“Over the last year, we’ve had the US pullout from Syria, the statement by Donald Trump on Iraq where he said NATO should take over and do more in the Middle East. The assumptions of 2010 that we were always going to be part of a US coalition is really just not where we are going to be,” Wallace said.
Johnson’s administration has repeatedly criticised Trump’s stance towards Iran, with Johnson warning that the president’s threats to target Iranian cultural sites could be a war crime.
