Ignore Trump’s wittering on post-Brexit trade

Oh good – another Trump intervention on Brexit.

Yesterday, Donald Trump told reporters outside the White House that he thinks Theresa May’s withdrawal deal is a bit of a dead duck – “sounds like a great deal for the EU” he said. “Right now as the deal stands they may not be able to trade with the US, and I don’t think they want that at all, that would be very negative.”

It’s important to note at this stage, that whether he is right or not is secondary to the fact that he certainly doesn’t understand what he’s saying. As is often the case.

The new Congress will cause trouble for Trump on trade if he tries a deal with the UK. Considering the complexity of what is to come it’s silly to treat him as definitive on such subjects.

And what does he mean “won’t be allowed to trade”? Did he mean there won’t be any trade at all with the UK?

In 2016 the US was Britain’s largest single export market. And the second largest supplier of goods. The UK was the US’s seventh largest supplier of goods and fifth largest export market. The UK is also the US’s largest source of foreign direct investment. So – “won’t be allowed to trade” – is gibberish.

Yet Theresa May gratified him with a response. The political declaration, separate but related to the withdrawal deal, makes clear that the UK will have an independent trade policy, she said. Such a trade policy will allow the UK to strike trade deals all around the world, including with the US. “We will have that ability outside the European Union to make those decisions on trade deals for ourselves, it will no longer be a decision being taken by Brussels, we will have control of that and we will strike trade deals that will enhance our prosperity and enhance our economy and bring jobs to the UK” she said.

So who is right?

Well, the deal as it stands contains the ever-controversial backstop arrangement. The backstop, which exists to prevent a hard border in Ireland, is a last resort option for the trading relationship between the UK and the EU. It will kick in if a better deal cannot be reached between the two sides by December 2020. Crucially, the backstop will see Britain locked in an EU customs union indefinitely, with no option to end it. And, being in the customs union means no independent trade deals with the US.

So the withdrawal deal contains the backstop, but the political declaration affirms that the UK will have an independent trade policy. Are they necessarily at odds with one another?

It gets more complicated. If we were locked into the backstop the UK could still negotiate a free trade agreement and implement the parts of it which weren’t covered by the customs union, ie. services, as David Liddington pointed out on Good Morning Britain. However, a free trade agreement on goods is out of the picture so long as the UK is locked into the customs union. And we are locked into the customs union if the backstop kicks in.

And, all of this is still predicated on the idea that the backstop would actually kick in – which it may not. It probably will, considering the 19 months it took to negotiate the withdrawal agreement it seems unlikely that a trade deal with the EU that avoids a hard border will be negotiated by December 2020. But hey, anything is possible.

So back to the question – who is right? Well, both of them. Sort of.

But the real issue at hand is this – why are we so interested in Trumps’s interventions in the first place? There is unlikely to be a trade deal agreed with the US in Trump’s time, or certainly not in his first term. It would simply take too long. Maybe if he gets re-elected, but the feasibility of that is a question for another day.

Nonetheless, his comments sent Sterling down 0.5% against the US dollar. That’s more than 11% down from the year high. The possibility of a good trade deal with the US was presented as one of the upsides of leaving the EU. So Trump may have put May’s already precarious withdrawal agreement in even greater jeopardy with pro-Brexit MPs.

The truth is, we would just be better off not listening. The collective obsession with a man full of bluster and so lacking in insight is strange at best, damaging at worst. Post-Brexit, trade talks with the US are likely to be long and difficult, involving a tricky reckoning with British public opinion on food and agriculture. The politics of a potential means it will take years, if it ever happens that is. Freaking out about what Trump says on impulse, probably based on his reading of Nigel Farage’s tweets, is a waste of time.