Blain’s Morning Porridge 16^th April 2025 – Should the UK sign a trade deal with the US or Europe?

“A friend who bullies us is no longer a friend, and since bullies only respond to strength, from now on I will be prepared to be much stronger.”

The UK faces a tough choice: a trade deal with the US or re-engagement with Europe. In Trump world these are mutually exclusive outcomes. Trump wants to boast about the trade deals he’s signing. Its time the Sir Keir Starmer got a bit UK First in how we respond. Too many strings could be attached to a US deal.

The UK is caught between the devil and the deep blue sea. We have to choose which course to steer between Scylla and Charybdis, the two monsters that once guarded the straights of Messina. One is Washington, the other is Brussels. Willy Odysseus had little choice but to sacrifice six of his crew to the multi-headed Scylla – a tough call on a crew already decimated by his previous poor command decisions during their 10-yr voyage back home to sea-girt Ithaca. The alternative was to lose them all to the Whirlpool on the other side.

The UK has a similar tough call to make:

• Do we do a trade deal with the USA? There once was a special relationship between Britain and our revolting colonial offspring in America, but given Trump’s attitude to previous trade deals, America First led-policies, and his aversion to treating allies fairly – that might now be a bad choice.

Or,

• Do we enter a new trade partnership with Europe? The upside is it will upset the still foaming-at-the-mouth hard-line Brexiteers. (I guarantee a furious email from my chum Douglas within moments of pressing send.) Most Brits are now prepared to acknowledge Brexit might just have been a silly mistake we should probably try to unravel.

We should not forget why the UK voted for Brexit: the EU remains a bureaucracy that spawned billions of pages of rules, it seemed to be moving towards becoming a super-state lording over the nations of Europe, and its costs seemed to outweigh the advantages. It remains “work in progress”. UK workers were convinced they would bear the costs of supporting feckless European workers. America is a vibrant, exciting economy – Europe…. less so. But the world is changing. America is isolating. The UK is a mercantile nation. Our future might be better served in a new global economy that embraces the old silk roads from Asia to Europe, rather than clinging on to the now struggling concept of a Transatlantic Economy.

Although we seldom acknowledge it, the reality is we Brits are probably now closer to Europeans in terms of our attitudes, our expectations, and thinking than we are to our American cousins. We have common purpose with Europe in terms of the role of the state, social justice, welfare, democracy and the environment – factors that have diverged in our relationship with the USA this century. Despite that, Republicans have typically been better friends to the UK. Neither Obama nor Biden had time for notions of a “special relationship.”

The reality is – Europe remains the UK largest trading partner. A partnership deal whereby the UK signs up for EU food and veterinary standards would remove many of the frictions that have cursed UK agriculture in recent years. It will reopen the gates to a wider new relationship with Europe – one which we will need to embrace as Europe takes responsibility for its own defence.

But a deal with Europe will likely close the door to the UK accepting USA agricultural products. You just know how Trump will see the UK doing a deal with Europe. He will be furious. He will accuse us of disrespect. I would not be in the least surprised if the UK is hit with new punitive tariffs for jilting him.

And Trump would be right to be worried – if the UK is willing to deal away from the USA, who else might also do so? The USA is prioritising trade deals with a whole group of nations including Japan, Korea, Brazil and Australia – how they respond to his overtures will be critical to who the world perceives his attempts to isolate China. There is an opportunity for all these nations to secure preferential terms because Trump needs to be seen doing deals.

If nations chose to “disrespect” Trump’s offer of trade with America, will they deal with China instead? That is his greatest fear, that his plans to use Tariffs to isolate China fail because other nations see it in their interest to deal with whoever they want to deal with. America is doing America First. Fine. Don’t be surprised that other nations do the same thing.

While Trump is squatting in Washington and Florida wondering who to insult next – Xi is doing the rounds in Asia on a charm offensive.

Last night the BBC got terribly excited when US VP JD Vance said there was a great chance of a trade-deal for the UK. He said Donald Trump loved the Queen and loves the King, that Americans are Anglo at heart, and there is a real cultural affinity between us. Therefore, the Trade deal is nearly on the table. Vance pointedly noted that Germany, which does more trade with the USA than the UK, will not be getting a similar deal. It remains on European 20% rates – and negotiations between Brussels and Washington are not going well.

Vance or Trump are hinting at deals to be done so they can show American voters and businesses that other nations are queuing up to kiss Trump’s arse negotiate US favourable trade agreements.

Should the UK do a deal with the US? I would love to know what readers think.

There are many reasons to consider engagement with the USA:

• Large parts of the UK economy are closely linked to US firms and key parts of their supply chains.
• However, this may be a bad thing if US firms no longer see us as partners, but components of their businesses. Vassal State, a book I’ve referenced many ties explains how US private equity firms, with state connivance, have become the owner-rentiers of the UK economy – paying zero tax and asset stripping the nation’s economic strengths.
• The UK’s drugs industry, including two of the UK’s all-too short remaining globally significant firms, AstraZeneca and GlaxoSmithKline both do huge amounts of business into the US – upto 20% of their profits. Pharma is currently exempt from Trump’s current baseline 10% tariff, but he’s mused on imposing all-encompassing 25% tariffs across the sector.

There are many reasons to be suspicious.

• Would any deal roll back the 25% auto tariffs?
• Would it put us in permanent conflict with EU food and produce rules – particularly on chlorinated chicken and hormone fed beef?
• Should we be signing a trade deal with Donald Trump – or should we be asking for a deal with the USA? (They are quite separate things.)

In a perfect world, where everyone plays nice and trades with each other – the UK could have strong relationships with everyone… and we would all be better off. But we live in a very imperfect world (becoming more imperfect every time Trump makes an utterance.) Given who and what he is – should we deal with him? As Odysseus taught the Trojans – beware of overly sun-tanned chaps bearing gifts.

I can just imagine what will happen after a Trade-deal with Trump is signed. He will call it beautiful, he will rave about it, and he will expect more. One of the key terms will be no deals with Europe, and no UK involvement in European defence. Trump will later turn on Starmer and demand 51% of all UK resources, a slice of the tax-pie, and a title to be bestowed upon him by the King.

Meanwhile… what other strings might be attached to US Trade Deals?

Last night I was out with some yachting chums and heard the news the Maiden Factor charity campaign has apparently suddenly collapsed because its main US sponsor has pulled out. I don’t have the full details, but apparently the sponsor has been forced to withdraw from anything that supports DEI – Diversity, Equality and Inclusion – goals for “political reasons”. The charities slogan was “Educate a Girl – Change the World.”

Back in 1989-90 Maiden was an all-girl crewed yacht that famously came second in the Whitbread Round the World Race in 1989-90. They milked their success to the max; famously crossing the finish line on one leg of the race wearing just their swimming cossies to show up the blokes who said ladies couldn’t possibly do it. For the last few years the restored yacht has been a key part of the charity’s work towards achieving its goals of empowering girls.

Donald Trump doesn’t like DEI. He doesn’t like empowered women – one of his first acts in power was to sack the head of the US Navy, the first female admiral to hold the post. How long before US trade agreements come with demands on who can and can’t benefit from them?

Out of time, and back to the day-job…

Bill Blain

Author Morning Porridge

Founder Windshift Capital

Partner Shard Capital