In all the talk and analysis of US trade tariffs over the last few weeks, much of the coverage seems to have focused on the noise and missed the signal.
President Donald Trump’s White House is implementing a comprehensive plan to unpick the multi-lateral administrative system.
What is taking place is a ‘factory reset’ of the international consensus: trade tariffs are just one mechanism by which Trump is exerting geo-political pressure to achieve several policy goals.
Five goals
First, securing US borders with Mexico and Canada. By threatening to hit imports into the US with 25% tariffs, Trump secured commitments from both Ottawa and Mexico City on combatting the flow of migrants and illegal drugs. To date the tariffs have not needed to be implemented.
Secondly, to re-enforce US influence in Latin America. Trump’s officials have put pressure on Panama and other nations on the American continent to reduce their cooperation with Beijing and re-engage with Washington instead. He has also scored wins with Colombia and El Salvador on combatting illegal migration and crime.
Third, to address Trump’s belief that China has engaged in unfair trade practices and currency manipulation. He has long complained about Chinese economic policies, during his first term the Trump treasury department officially designated China as a ‘currency manipulator’ in 2019.
Fourth, to remove perceived trade barriers to US businesses. The EU has already signalled it could make concessions, with trade commissioner Maros Šefčovič indicating he might lower the EU’s own tariffs on US automotive products in his most recent trade visit. Additionally European Commission president Ursula von der Leyen has indicated a shift in EU energy procurement, away from Russian sources and towards US liquified natural gas.
The US’s muscular approach to diplomacy and trade is underpinned by the ‘America First’ agenda. This reshaping of the world economy, forcing a shift away from the international consensus of the past 60 years, will establish a new world system, built on bilateral collaboration and economic nationalism. The effects are already visible with many multinational organisations committing to increasing investment in US.
US withdrawal
The ultimate targets are the bureaucratic organisations that Trump feels haven’t operated in the best interests of the US.
That’s why US withdrawal from the Paris Climate Convention, the World Health Organization and the UN High Commissioner for Refugees are important indicators of what is to come.
President Trump is taking the same approach at home with the shuttering of USAid, the Department of Government Efficiency’s (DOGE) examination of government spending and the proposed disbanding of the Federal Education Department.
President Trump’s administration is energetically activating all channels. Vice president JD Vance’s comments to the NATO summit in Munich is evidence that all the established rules and relationships will be challenged.
Redefining roles
European leaders have been forced to explore ways to redefine their role at home and on the international stage.
This systemic change will impact the global economy and all nations, whether directly targeted or not. The announcement this week regarding additional fees on Chinese owned, operated or built ships docking in the US will create even further uncertainty in global supply chains, and further add to the economic pressure on China.
No one should doubt the resolve of the Trump administration in pursuit of ‘America First’, and the president’s determination to reset the entire global system.
For the UK politically, economically and diplomatically set between US, EU and China, the opportunities are significant, but so too are the risks. The events of the last few weeks are not only a forewarning of the next four years, but also a wake-up call to our politicians, diplomats and businesses leaders.
Starmer's moves
For Sir Keir Starmer in particular, this represents an opportunity and a challenge. In the best-case scenario, the prime minister could establish the UK as a trusted partner of the US and the EU, with possibility to act as a trusted broker between the two.
President Trump is a long-standing Anglophile with Scottish ancestry and leading voices in his administration have already indicated that a deal could be worked out with the UK on tariffs. Both of these factors play into the UK’s hands.
Threading the needle won’t be easy, but get it right and the UK could ignite the spark of growth in the UK economy.
