Starmer’s ‘liberation day’ from Trump lies in a new EU customs deal

An unreliable US president cannot define the UK national interest and must not wield a veto over how the PM performs his balancing act with Europe, writes Andrew Grice

Before last year’s election, some pro-EU allies of Keir Starmer wondered whether a Labour government could be more ambitious in EU relations than suggested by the dark red lines in its manifesto: no return to the single currency, the customs union or free movement.

One aide told me then: “We might be able to forge a customs union without rejoining the [existing] customs union.”

The prime minister has transformed relations with EU leaders but stuck rigidly to his three red lines. However, since Donald Trump’s “Liberation Day,” some senior Labour figures have quietly revived the idea of a new customs arrangement with the EU to “liberate” the UK to limit the impact of US tariffs. One Labour MP told me: “Trump has put it back on the agenda.”

Under Boris Johnson’s thin trade deal, about 25 per cent of UK exports to the EU still pay tariffs – either because they do not meet EU “rules of origin” or because the administrative hurdles are so high that companies opt to pay them. These tariffs could disappear under a new customs agreement, potentially reversing an estimated 13 per cent drop in UK exports to the EU.

While the government insists red lines are intact, ministers’ language on EU links is getting warmer in the wake of Trump’s tariffs. Rachel Reeves, the chancellor, said the global trade war made it even more “imperative” to improve UK-EU trading relations and is arguing the case behind the scenes.

At a UK-EU summit on 19 May, an agreement on defence cooperation will be trumpeted, and progress will likely be made on issues such as a rebadged youth mobility scheme. Under a deal on agrifoods, ministers appear ready to accept dynamic alignment – signing up to future EU standards – with a supervisory role for the European Court of Justice. A study by Frontier Economics suggests deep alignment in all goods would wipe out the impact of Trump’s tariffs on the UK and boost UK growth by up to 1.5 per cent, repairing more than a third of Brexit’s 4 per cent hit to GDP.

Rejoining the single market is off limits because the EU would demand a return to free movement. That would be a clear breach of Labour’s manifesto and a gift to the Conservatives and Nigel Farage’s Reform UK, which would magnify the government’s failure so far to stop the boats crossing the Channel. Ministers are confident of reducing legal migration (due to fall anyway), but free movement would limit progress.

The demands of the US president and vice-president on any future trade deal make a customs agreement with the EU more imperative for the UK (EPA)

Labour MPs who advocate a customs agreement insist an “arrangement” would not cross the manifesto red lines. Inevitably, the Tories and Reform would cry “Brexit betrayal;” they always do.

Morgan McSweeney, Starmer’s powerful chief of staff, believes Farage’s party, rather than the Tories, will be the main threat to Labour at the next election. It's a fair bet he would urge Starmer not to risk further alienating 2016 Leave voters in the red wall by getting too close to the EU.

For once, Starmer should reject McSweeney’s advice. The PM has said that “the world as we knew it has gone,” which allows Labour to revisit its election platform in the national interest. A customs deal with the EU would help secure the economic growth the UK urgently needs. It exports almost twice as much to the EU (£358.1bn) as to the US (£182.6bn). There is public support for closer EU ties; more than half of people who voted Labour last year believe the government is not going far enough.

Some Labour figures worry that getting too close to the EU, which Trump detests, might scupper hopes of a US-UK trade deal just as they are rising again. But an unreliable and capricious US president cannot define the UK national interest and wield a veto over how Starmer performs his tricky balancing act. The PM still insists he will not choose between the US and EU; that strategy now requires an ambitious customs agreement with the EU.

A UK-US deal is not in the bag. The Independent revealed today that American negotiators might demand repeal of the UK’s hate speech laws, while The Wall Street Journal reports the US will demand that its trading partners isolate China in return for lower US tariffs. Both would be problematic for Starmer.

The PM should listen to Liam Byrne, Labour chair of the Commons business select committee, which has proposed 20 ways to reset EU relations, including customs cooperation and simplification short of rejoining the customs union. Byrne rightly argues it will be easier to meet the challenges posed by the US, China and Russia that will define this five-year parliament by drawing closer to Europe. “Our relationship with the EU today is stuck in yesterday’s logic. Mere tinkering will not do,” he said. “We must find a bold but pragmatic new way forward.”

Starmer should throw off self-imposed chains designed for the old world, which are needlessly holding back the UK economy in the new one.