So market's very much Stephen holding their breath for this announcement in the Rose Garden. Tomorrow, Donald Trump sets to lay out his tariff plans and America's trading partners waiting nervously to see what awaits them. The EU Commissioned President
Ursula Vonderlyon has spoken this morning. She says that Europe is ready to retaliate, but what should the UK's approach be, And please to say to join us at the studio now we're joined by Crawford Faulkner, who was until the end of last year the UK's chief trade negotiation advisor. So really good to have you with us, Crawford, Thank you. I saw the Trade Secretary, the Business and Trade Secretary,
Jonathan Reynolds last week at Chathamhouse. He was talking about the UK's trade strategy and I have to say, frankly, he was still keeping it very very vague. Is that the best approach right now until there is more clarity from the US President Donald Trump?
I think I think you've got to keep your options open to some degree until you see what actually happens. But I think you have to be and I'm sure he is well prepared behind the scenes for certain scenarios, so you know you will need to make up your mind whether one you're going to retaliate be what your response is going to be in terms of whether you negotiate.
See how you've aligned yourself with business so that you're keeping them on track with what's going on, and d closely reading and understanding what your foreign partners are doing so that you know you have a sense of what the global response actually is. All of those things. You need to have game plans ready to go. I assume that they have, well, they an't communicated in advance, you know, I mean, this is a government for goodness sake, you know.
Now I'm on the outside.
You know, it's kind of like, yeah, it's pretty difficult when you've actually got to try and discern what's going on. So but yeah, you know, you're pretty good at asking questions so you can find out if you try.
But given your experience inside the department, you're confident in those bands of all been made.
I don't know what they're doing now.
Everything was fine when I was there, of course, you understand at least till the end of December. No, No, I'm sure recently, I'm sure I'm sure they have.
Can you help me to decipher maybe a hint that Johnny Reynolds was dropping last week I asked him whether it would be worth scrapping the digital services tax to try and get concessions in terms of tariffs from Donald Trump, and he said that, you know, I'm sure that there's a fair level that will be set. Do you think that that is on the table? Is it worth making a concession on the digital services tacks? When Rachel reads the Chancellor is so fiscally squeezed right now, well.
Look from the sounds of it, again, I don't know what's been going on on that, and it all happened after I left, So just to be clear, there's no carryover. If I read what's going on in the media, it sounds like the government seems to be saying Our government seems to be saying that, you know, they're resigned to the fact that Trump's going to apply some tariffs anyway. So clearly, if that's the case, then you don't make any concisions right now.
He's going to.
Apply to tariffs, and there's a fundamental question the once he's applied whatever those tariffs are as to well Okay, what do you do next? They have intimated, clearly from what I'm reading publicly, that they're interested in getting rid of digital services tax. Now question is is that tactical on their part or is that serious? I mean, what is it by you? How important is it to them that that happened. I have no sense for that not being in a room, but I presume that they will
come back to that after these tariffs are applied. I myself would have been a bit skeptical about whether it was a sensible straight trade to say no tariffs on the UK and get.
Rid of digital services tax.
And I don't have the impression, but I don't know that that was how it was going. I mean, I think it would have been. There was a range of things that were being discussed, and so therefore it would
have been some sort of package exercise. I think if you were trapped into a straight deal, which is get rid of the revenue from that particular tax, and we know what people have said that amount seems to be around seven or eight hundred million at the moment that you get rid of that to get rid of tariffs, which as yet are undefined, that would be a pretty narrow and difficult deal, not impossible, But as I say,
that's not on the table now. The tariffs have now been applied, So I think the question is what's the combination of elements post application of tariffs that would be seriously up for negotiation if the US is genuinely interested in getting rid of the Digital services tax, and I can imagine that they would be, because they've been trying to get rid of it for years prior to Trump. Not,
of course, you negotiate on it. What you negotiate depends on what they have on the table, and as I say, my view, but I'm an old fashioned negotiator, would be, well, I'm not getting rid of.
Your tariffs just for that digital services tax.
You know, you need to go further if I was going to do that, and then you're into the logic negotiation. But just bear in mind with the Digital services tax, that has been seriously negotiated for years, So there's nothing new in saying that you're prepared to negotiate on it. And indeed the UK government had a deal with the Biden administration which sort of settled it pro tem. But I don't think there was ever any reason to believe that the US Congress would ever have accepted the so
called OECD consensus on these matters. So, irrespective of what Trump would do, I don't think the Congress would ever have settled on a deal that would resolve the issue satisfactorily. So I don't think there's I don't think of the government if it was considering that it's not crossing some terrible rubicon. There's nothing really new in that. But only people in wank Land know that that's been the case. It hasn't made it into general public.
What else does the UK have to put on the table now, Well.
You know, I think it's a bit.
You know, again, you tend to think of trade negotiations as a there are some game, because that's that's the way in which people.
Talk about them.
You know, I won the negotiation, I mean, everybody wins the negotiation. I made fewer concessions than they made, when, of course the economic benefit actually comes from the concessions you make far more than the concessions that they make, because that's the way the economic world works, but not the political world.
I get that.
So I think with the UK and the US, you know, there will be elements of trading things. I mean there, you know, we have we still have some residual tariffs. We still have some you know, regulatory arrangements that affect goods and services trade that you know, probably could be tuned up to be both more efficient and more liberalizing. And so do they. And they certainly have trade barriers. I've got trade barriers in agriculture. They have a nice
juicy twenty seven and a half percent tarifon light trucks. Now, I don't think we're in the we're in the business of making light trucks.
But you never know.
If you got rid of that twenty seven and a half percent tariffon so called light trucks in the United States, you know, maybe one day we could. I mean, who knows. That's what the market will tell you. But you bear in mind for autos. You know, US is kind of strutting around saying how perfect it is on autos. But that's where the Big three have been making their money, in these gas guzzling light trucks. That's why there's a huge tariff on it. That's why the United States has
protected that market. That's why the United States consumer goes there. So you know, there's all that that's up for grabs in a negotiation. Not that I'm saying that that would be the key to a negotiation. You know, we could say, look, we want fly in, fly out visas for our businesses to go into the US in a more liberal way,
just to give you one example. So small things thereat and they wouldn't you know, there are all sorts of things that you would do, and there are all sorts of things that you could do together as well.
I mean, these days.
Negotiations don't have to be a pe for you and a bean for me. You know, they can actually relate to the real economy and they could actually say, listen, we want to have some kind of construc coructive future
relationship on issues like AI and on innovation. I mean, you know, United Kingdom has an agreement with with Australia which if you read the media you think it was all about beef, and sure it's got some beef in it, but it's got an amazing chapter on innovation in terms of the cooperation between both business and government officials on innovation policy.
So with the United.
States, with the world's biggest economy, what does the United Kingdom need?
Growth? Growth is what we're after.
And if you could approach your relationship with the United States that actually was a significant liberalizing agreement in areas of goods and services, then you're going to shift the dial on growth more than you're going to do with any other potential negotiating item in the future. Now, Trump says he's sort of up for that. I have no idea whether that's empty rhetoric or whether it's for real.
But if it's for real, and even if it's half for real, it's the UK's interest to really seize that optunity and say, yes, we want to pursue that kind of deal.
We don't want to just find that after you've applied these tariffs.
All we're talking about is how we get rid of these additional tariffs and what we have to pay for them. It's like, how do we build a bigger deal on trade and economic issues in the future. Now, I think, you know, we have every reason to give her to go.
Now. It might not work, but nothing ventured, nothing gain.
We're focusing a lot on the US here, and there's a whole world out there. Right there's also an European Union that Donald Trump doesn't seem to be very happy with. Is it realistic for the UK to be trying to hedge relations between the US that you China as well, And is it actually possible to have equal, grown up businesslike relations with all three simultaneously.
Not necessarily equal, but grown up as good. And I think there's a track record that you can yes. So the short yes, I mean, you know, United Kingdom has every reason to be doing what it wants to do right now with the EU, which is to sort of tidy up some of the frictions that have been left over from Brexit and to see whether they can actually be cleaned up in a way that particularly small businesses are finding transactionally difficult.
So of course you can do that. Now.
The government's been very clear that it's not interested in going back into the Single Market and it's not interested in going back to the customs un And now if that was the case, then some things that you might end up doing with the United States. But I don't know whether you would would become more difficult, but that's hypothetical. I don't see any huge problem there, So there's no reason why you shouldn't be able to tidy those things up.
You already have are very by global standards, a very good free trade agreement with the European Union, so I mean, from the European point of view, I don't see that as as an obstacle. There are a couple of things which you might end up doing with the EU at the very micro product level that might be problematic with the US at the micro product level, but I don't see them as kind of deal breakers and show stoppers,
and you should be. I mean, we're talking about the United States because we're going to have a major theatrical performance in the next little while in the Rose Garden and where they're permitting. So but for the rest of the world, the United Kingdom still can and should be pursuing broad and successful trade and economic agreements with the fast growing economies of the world. So, you know, we are, as I understand it, still negotiating with India, We're still
negotiating with the Gulf. We're in and here we're into real want territory because you know we're in we're in an Asia Pacific agreement which is called CPTPP, which you know, I don't know why it's called CPTPP. I think you can blame the Canadians for that or under Trudeau for that, but a fact it's an Asia Pacific trade agreement with some of the fastest growing economies around, and there's a
cue of people wanting to join it. So you know, we should the United Kingdom be really pressing now to accelerate the processes for countries to accede to that agreement so that we can get the benefits from a broad agreement.
With that part of the world.
And we have to think about what we want to do with Brazil and mercasor for instance. You know, there's a whole range of countries in Asia, whether it's Thailand or Indonesia for instance, which are fast growing prospects. So of course you have to go after all of those things. And I see no reason why.
Not opportunities there as well, thinking I had though to tomorrow's announcement, where is the UK vulnerable? If you were in your old job and you're watching the announcement tomorrow, what would have you with your head in your hands saying this is really bad for the UK.
You know, it's funny. I don't work for the UK government anymore, but I kind of I still feel somehow weirdly disloyal. If I was to be passing out information of what would really hurt the UK that could be advantageous to the United States, you know, not as if I imagine for a minute that anybody would listen to a word I say, so probably I should say yeah, No, I mean I think, you know, I think generally I
would look at the whole picture. You know, if he goes to it, you know, a very high end of tariff's across the board, you know, you know, my head would be in my hands for the consequences for the global economy. I mean, in other words, if you're if you've got really high tariffs applying to the European Union and Japan and the United.
Kingdom, you know.
And you're talking twenty percent plus, and it's across the board, and it's like, oh my god, I mean, this is this is the kind of shock you'd really be scared about. And that kind of dwarfs everything else, just simply because that puts you, you know, that that puts you in the scenario, the upper scenario that all the economists have been assessing for what the impact would be globally.
Now, all the.
Noises that are coming out of the White House are that he's not going to that extent, but I don't know whether it's true or not.
Nobody really knows.
For the UK, you know, it sounds like, you know, everybody's on the Donald Trump naughty step. It sounds it sounds like in terms of the good students that are on that step, you know, we might be down the good student end of that. So you know, if you if you're down at five percent or lower, that's what they apply. That is kind of like that's still damn annoying. But I think that's reasonably survivable for the time being.
Once you get above ten percent or you know, then I think you sort of say to you that that that's you know, that's something that you know will will affect business in goods.
And and that's that's something to take seriously.
I don't think i'd have my head in my hands, but I think that's the sort of area that you know, you think, Okay, I thought we might have got off a bit lighter than that, because again, if you stretch it, if you think, if we're at ten, then I start to worry that the bad guy's so called the Gang of fifteen or whatever he's calling them, then they're they're presumably they're going to be they're going to be up
around twenty or more. So you know that that would sort of that would sort of bother me for both those reasons, but you know, it's entirely in his hands. Bear in mind, and I think it's important I don't diminish any of this, and the numbers speak for themselves, but bear in mind that you know, this is goods trade and as far as we know, services trade directly appears not to be affected, which is a vast amount of global trade, and of course the impact will still
affect services industries. And you know, most people seem to think that goods and goods and services and services, but in actual fact you could argue that in real value added terms, most goods are actually majority services. But having said all that, I think it's not to diminish the fact that it's it's a serious that's a serious attack.
On growth in the world economy.
So if you're up at that top end, I don't think the markets are going to clearly are clearly going to send a message on that.
So let's hope not