Britain should cosy as much as Donald Trump, says HAMISH MCRAE

Europe has to cuddle up to Trump. That was the big message from Christine Lagarde, president of the European Central Bank, last week. She said in an interview with the Financial Times that Europe’s politicians should co-operate with his plans for tariffs, buying more from the US, rather than try to retaliate. It was, she said, ‘a chequebook strategy’.

Follow the money. The brutal truth is the European economy is no shape to fight a trade war with America, so its best option is to appease the new administration.

The European Commission is developing plans to buy more US agricultural products, co-operate on defence procurement and so on. This is in sharp contrast to its attitude towards trade with the UK in the Brexit negotiations.

The task for our new Business Secretary, Jonathan Reynolds, is to use the fact that we are not part of the EU to our advantage. How can he do so? Five points: First, he should be aware there will be no special favours from America. It is lesson we have learnt time and time again. Even during the warmest period of our relations during and just after the Second World War, that was true.

It was a huge shock to the new Labour Government in 1945 that Lend-Lease, which kept us going in the War, was ended abruptly after Japan surrendered. We only managed to pay off the loan that replaced it in 2006. It is a transactional relationship, as always.

Next, that is fine. We can be useful to the US and must identify what we want in return. An obvious area is trade in services. The US and UK are the largest and second largest exporters of services, but we are shut out of Europe. After Brexit, US financial institutions were forced to shift people to Paris and Milan, albeit in far smaller numbers than predicted. That is ridiculous. We both need open access to Europe for financial and other services.

Third, we can co-operate even more closely on defence. BAE is the sixth largest defence contractor in the world – the top five all being American, the next five being either Chinese or Russian.

Rolls-Royce and Babcock are smaller but significant. This uncertain world will have to spend more on security, and we are reliable supporters of the US in ways that Continental contractors have not always been.

Fourth, there have been a string of detailed trade agreements signed by the previous Government with US states, including Washington (main base of Boeing), Indiana, Florida and Texas. This approach began when it became clear that an overarching US-UK trade deal was going to be too hard. They are not substitutes for a wider agreement, which may open up now Joe Biden will no longer be there as a block, but meanwhile they are a useful half-way house. Reynolds needs to press on with them. 

Finally, we need to differentiate ourselves from the Continent. We are not France, which is having a tough time trying to get its austerity budget through. We are not Germany, which pressed on with the second Baltic Sea gas pipeline from Russia despite Trump’s previous administration’s efforts to stop it. We are not Italy, the only G7 country to join China’s ‘belt and road’ initiative. Although it withdrew a year ago, when Giorgia Meloni’s new government realised Beijing was not the cosy friend it purported to be.

None of this is to suggest that the UK should abandon its efforts to improve trade relations with Europe. It is just to say we too should adopt a cheque-book strategy. If they want to sell us more stuff what do they offer in return?

A final point. The new US commerce secretary will be Howard Lutnick, head of Cantor Fitzgerald, whose offices were destroyed in the Twin Towers attack in 2001.

He only escaped as he was late that morning, dropping his son off for his first day at kindergarten. He rebuilt the firm thanks in large part to the London office, which kept trading. No special favours, but he knows how important an ally the UK can be.