Feel that sweet Brexit bonus

 

Newsletters

London Playbook

Feel that sweet Brexit bonus

By Andrew McDonald

23 mins read

April 3, 2025 8:02 am CET

https://www.politico.eu/newsletter/london-playbook/feel-that-sweet-brexit-bonus/

London Playbook

By ANDREW MCDONALD

 

with BETHANY DAWSON

 

Good Thursday morning. This is Andrew McDonald.

 

DRIVING THE DAY

NO LIBERATION FROM A HANGOVER: Keir Starmer is meeting worried business leaders right now as the government tries to move back into schmooze mode over Donald Trump’s tariffs. Ministers’ goal over the coming days is twofold: to reassure businesses and Brits that everything will be all right, despite the major economic damage to come from blanket 10 percent charges … and to push on with efforts to secure a deal with the U.S. that might give us a carve-out down the line. Things can only get better, right?

 

Trump card: As you’ll have seen by now, the U.S. president’s sandwich board of “reciprocal” tariffs revealed Britain is getting the “minimum baseline” rate of 10 percent — which sparked small sighs of relief throughout the government, given all countries were included and many, including the EU, were hit much harder. Almost all of the national papers (bar the Metro and Sun) splash on Trump, and you can catch all 48 minutes of his rambling speech in the White House Rose Garden here.

 

Taking stock: The move by Trump — probably the biggest of his second term so far — sent stocks sliding in after-hours trading, suggesting that investors expect deep losses when Wall Street opens today. All eyes on the U.K. markets when they open at 8 a.m. As it stands you’d expect Britain’s growth forecasts to be downgraded, with implications for the autumn budget.

 

**A message from Lloyds Banking Group: Right now, over 1.5 million households across the country are on waiting lists for social housing. At Lloyds Banking Group,  we are continuing to champion social housing and that’s why we have supported £19.5 billion of funding to the sector since 2018. Find out what’s ahead**

 

Chin up! Whitehall officials were still trying to work out the details and small print from the U.S. late last night, but those Playbook spoke to believed that things could have been much, much worse — at least for the U.K.

 

Hence … the early efforts from No. 10 to push the narrative that Starmer’s efforts to charm the president paid off. “We don’t want any tariffs at all, but a lower levy than others vindicates our approach­,” a Downing Street source told Playbook (and large parts of the Lobby). “The difference between 10 and 20 per cent is thousands of jobs. We will keep negotiating, keep cool and keep calm. We want to negotiate a sustainable trade deal, and of course to get tariffs lowered … we will continue with that work.”

 

Trade phony war: Business Secretary Jonathan Reynolds, in the government’s first on-record response last night, said “nothing was off the table” in terms of potential retaliatory action — though he maintained that the U.K.’s preferred outcome is still a deal that eliminates the tariffs instead of a trade war.

 

Expect to hear much more of that … from Reynolds on the morning broadcast round shortly. He’ll also make a statement to the Commons later this morning, while hacks will have a chance to grill Starmer himself when he launches Labour’s local election campaign in the East Midlands in the late morning. After speeches from the PM, his deputy Angela Rayner and Labour Chair Ellie Reeves, he’ll do a short Q&A with journalists.

 

The problem with the rosy narrative: That baseline tariff of 10 percent is still a very significant blow to the U.K. economy. Britain also exports a lot of vehicles to the U.S., which as of 5 a.m. are subject to the previously announced 25 percent tariff Trump confirmed at the start of his speech. Remember we’ve already got a 25 percent import tax on steel and aluminum, too.

 

He doesn’t care about you, babe: The positive vibes are also diminished by the big list of other countries that escaped relatively lightly on the 10 percent flat rate, given they didn’t bother offering handwritten invitations to state visits with the king … or (allegedly) float binning or watering down the digital services tax … or drone on and on about the “special relationship.” Leftist-led Brazil, which briefly banned Elon Musk’s X last year, is also at the lowest rate.

 

Now that’s a line: “Even the Taliban got a better deal than Starmer,” an SNP official, of all people, griped to Playbook last night as it was revealed Afghanistan is also in the 10 percent club despite “charging” the U.S. more in tariffs than the U.K. … err, if you include “currency manipulation,” “compliance hurdles” and all the rest, according to Trump’s highly suspect sandwich board figures. Just check out the White House’s supposed mathematical formula.

 

But at least … we’re not the EU, which got hammered with 20 percent as a whole bloc. How’s that for a Brexit bonus, or “dividend,” as the Telegraph playfully dubs it?

 

Team Trump agrees: Trump ally and admin official Sebastian Gorka told Newsnight: “After Brexit, you’ve reaffirmed your independence, and I think that is being proven today by the special rate that has been afforded to the U.K.”

 

Then there’s this: POLITICO’s senior trade reporter in the U.S., Doug Palmer, points out that one of the 60 trading partners hit with higher rates than Britain was the 27-nation EU … so the number (and the U.K.’s good fortune to avoid higher rates) is actually bigger than it appears. Harder hit were Japan (24 percent) and China (34 percent), among others. Though before anyone gets too excited, remember that global economic shocks will rebound on Britain, too — especially with expected retaliation overseas.

 

How Britain got away with it: No doubt Starmer’s top team would love to claim credit for Britain’s relatively lenient treatment on Trump’s Liberation Day, Playbook D.C.’s Managing Editor and Author Jack Blanchard emails in from Washington. But while it’s true the PM has struck up a surprisingly warm relationship with the U.S. president over the past 12 months, the White House has been crystal clear that these supposedly “reciprocal” tariffs were all about a simple — in fact, terrifyingly simple — calculation.

 

Back of a fag packet: As one random internet sleuth figured out, it appears the calculation used by Trump’s crack team of officials to work out the tariffs was based almost entirely on each nation’s trade imbalance with America. While half the world is up in arms at that approach, it worked out quite well for the U.K. By Washington’s counting methods, the U.S. actually has a trade surplus with Britain. This appears to be the reason Britain is anchored on Trump’s baseline rate of 10 percent, along with Brazil, Australia and the penguins of these Antarctic islands. Still, a win’s a win … If you can call that a win.

 

Not currently clear … is whether that 10 percent baseline is fixed. U.K. officials are certainly hopeful it isn’t, and a second government official said Britain will be “back to the negotiating table” today to secure a deal that might reduce or — dream big! — eliminate the tariffs. “We don’t want to see any tariffs, and the only way that we do that is by negotiating the deal,” this person added.

 

Gorka, you corker: Those dreaming big will be cheered by other comments from Gorka on Newsnight, where he said there’s “nothing to say that the current rate … could not improve. It is the beginning.” Though, of course, no one really knows what’s going on in Trump’s mind.

 

For one thing: Remember when Trump told POLITICO this? “I think there’s a very good chance that in the case of these two great, friendly countries, we could very well end up with a real trade deal where the tariffs wouldn’t be necessary.” That was February.

 

What is clear … is that the tariffs are coming, and fast. The 10 percent baseline tariff on the U.K.’s £60 billion worth of annual exports to the U.S. comes into effect from Saturday at midnight. Government officials are gonna have a busy weekend.

 

Maybe Charlie can help: Former NASA astronaut and Democrat U.S. Senator Mark Kelly tells POLITICO’s Power Play podcast that Trump could be swayed in tariff negotiations by the “golden coach” strategy of a state visit to the U.K. “That’s kind of his thing — golden coaches, so I imagine he would appreciate that,” Kelly said. Listen here.

 

SO, WHAT NOW? First up for the government is reassurance time. As this email goes out, Starmer is chairing a roundtable of business leaders from “key sectors” — those likely impacted by Trumpageddon. His words at the top of the meeting are on camera and should be released shortly.

 

While elsewhere in government … there is gonna be a flurry of calls with business all day mainly led by DBT ministers. Reynolds will, at some point, speak to the very worried automobile industry.

 

Not involved: But David Lammy won’t be raising the issue when he talks to Marco Rubio at a NATO foreign affairs summit in Brussels, Playbook’s Sam Blewett texts in.

 

In fairness: The transatlantic top diplomats are meeting at the NATO summit in Brussels to discuss Ukraine, as well as maintaining the fragile peace in the Western Balkans. Lammy was instead deferring trade talks to Business Secretary Jonathan Reynolds and the PM, insisting to Sam that Rubio came away from the G7 foreign ministers meeting in Canada last month “pretty clear that all of us are concerned about a sort of return to protectionism.”

 

On the Lam: Lammy was speaking to Sam in Belgrade for a piece looking at the ever-thorny region (watch this space in the days to come) before the foreign secretary heads to Belgium. Diplomacy was proving tough in Serbia despite the foreign secretary signing various deals aimed at fostering closer ties, with Lammy getting a slapdown from the increasingly authoritarian President Aleksandar Vučić as he dared to raise protests gripping the Serbian capital. “It doesn’t even occur to me to make any comment on protests and demonstrations in Great Britain because I respect the sovereignty of Great Britain,” Vučić said in a statement before assembled media.

 

Surprise, surprise: There was “no time” for questions at the “press conference.”

 

BACK TO TRUMP … and the U.S. president will be dealing with the fallout in his own way today — you’ll want to read this morning’s D.C. Playbook by Jack when it lands in a few hours.

 

One side plot: Will the president pop up with another birthday wish for Nigel Farage this evening? The Reform UK leader is holding a “small” party to mark the occasion this evening, Playbook hears — but the expectation within Reform was that Trump would be too busy to partake. Cynics may wonder if their special relationship has cooled.

 

FEELING FOR A DEAL

AFTER THE REASSURANCE … comes the push for a deal that might see Britain get out of the tariff hole and prove just how special the relationship is — though that’s easier said than done, innit. The Times’ Steven Swinford reports that the government will embark on a “frenzy of diplomatic activity in the coming days” to get the deal over the line. Luckily, POLITICO’s ace trade reporter Graham Lanktree has some insight into what a trade agreement between the U.K. and the U.S. could look like.

 

Up for review: The draft U.K.-U.S. trade agreement contains commitments by Downing Street to review enforcement of its online safety and digital competition regulations, two people briefed on the pact tell Graham. The deal currently sitting on Donald Trump’s desk in the White House is a framework agreement that, officials hope, would see the U.K. eventually get carve-outs from Trump’s tariffs imposed today.

 

Couple cobblers: The deal has been cobbled together in a little over a month by Reynolds, U.S. Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer and their negotiating teams.

 

Digital dilemma: It contains “a commitment to a review of the Digital Markets and Competition Act and the Online Safety Bill,” said one of the people. “So just a regulatory review of the implementation of those various pieces of legislation. Not a do-over.” All of these commitments from the U.K. are “all in the mix, yes,” said a second person briefed on the talks. “But whether the prime minister or secretary are able to overrule the rights of consultation, the right of parliament in agreeing something,” they said, “that’s where I think that’s probably politically ambitious for government to do.”

 

The when: The Guardian’s Pippa Crerar also hears that “broad agreement” has been reached with the U.S. over a deal the U.K. hopes will reduce tariffs — but officials she spoke to acknowledged getting a trade deal over the line could take weeks or months.

 

And of course … as former Trade Minister Greg Hands told Wednesday’s Playbook PM, previous trade talks were sunk by wanting a carve-out from the Online Safety Act. It doesn’t sound like something that will especially please digital health campaigners, many of whom were involved in Starmer’s big “Adolescence”-themed roundtable this week.

 

Summed up well: A source tells the Mail’s Jason Groves that “everything we are discussing is going to be controversial.” Another blunt reminder that all roads for the government will lead to pain in some form.

 

 

TODAY IN WESTMINSTER

OFF THE RUNWAY: A planning decision is coming this afternoon on the proposed expansion of Luton Airport — and the expectation in government is that an approval is likely to be handed to Transport Secretary Heidi Alexander today. The decision will be announced via a letter on the national infrastructure planning website at 2 p.m.

 

Ironically: A High Court case by climate charities fighting the government’s aviation expansion hopes reaches its third day today. They hope to take the plans back to the drawing board by arguing that net zero aviation ain’t possible. The government disagrees, obvs.

 

TANGLED UP IN VIEWS: Ministers plan a fresh round of reviews to mollify MPs and artists furious at plans to let AI rake over copyrighted material. My colleagues Joseph Bambridge and Dan Bloom have dug into how the two biggest questions — how artists can “opt out” of AI learning, and how they’ll get transparency about what AI has learned — still simply don’t have an answer. Ulp! The reviews (which Tuesday’s Times got wind of, too) are set to be announced as part of the Data Bill.

 

Officially, there’s no delay here … but it sure feels like the go-slow. Campaigners and big tech firms are entrenched and digging in their heels. One government figure says: “There’s a danger that we get this badly wrong.” Read the full piece here.

 

WHAT THE GOVERNMENT WANTS TO TALK ABOUT: Work and Pensions Secretary Liz Kendall and Employment Minister Alison McGovern will be in Barnsley to launch the first of nine “Get Britain Working trailblazer” programs — fourth sector pathfinders, anyone? — to tackle inactivity. Kendall is likely to do a pool clip and a media huddle shortly after 2 p.m.

 

What the government also wants to talk about: Education Secretary Bridget Phillipson will use a speech at the “festival of children” to argue that more men should become teachers to help combat “toxic” behavior in boys. The Guardian’s Richard Adams has a preview.

 

BUT HAVING MORE FUN THAN ALL OF THEM … is Scotland Secretary Ian Murray, who’s in New York on a trade mission that may have been complicated by recent events. He’s got a full pipe band with him, and even got Peter Mandelson to wear Tartan troosers. Murray also met Trump’s U.K. envoy at the U.K. embassy Tuesday night, Playbook hears, where the pair discussed Trump’s Scottish roots.

 

MORE PLEDGE PROBLEMS: Starmer looks unlikely to fulfil a pre-election pledge to introduce a Hillsborough law by the disaster’s anniversary to prevent cover-ups from public bodies, the Times’ Patrick Maguire reports.

 

MEAT FOR DONORS: In case Elon Musk is looking for a next move after the White House … POLITICO’s expert in all things lobbying, John Johnston, has a tongue-in-cheek (but detailed) guide to how to meddle in U.K. politics.

 

FROM COURT: A High Court hearing about Labour’s decision to impose VAT on private schools concludes today. A ruling on the case is expected at a later date.

 

USURPING THE MAYOR: The leaders of London’s 32 local boroughs have appealed to Deputy Prime Minister Angela Rayner in Jim Waterson’s London Centric for more power over Mayor Sadiq Khan. They want a “combined board” of twelve council leaders and the mayor, forcing him to get majority approval on any key strategic and funding issues.

 

STATS DROP: Fortnightly pupil attendance figures for schools in England … the weekly situation report for NHS hospitals in England … and business insights and impact on the U.K. economy all appear at 9.30 a.m.

 

SW1 EVENTS: Former Sports Minister Tracey Crouch discusses the efficacy of government reviews with the IFG at 2 p.m. (details here).

 

REPORTS OUT TODAY: The government should adjust protection to defined benefit pensions to encourage investment and spur economic growth, says the Social Market Foundation.

 

HOUSE OF COMMONS: Sits from 9.30 a.m. with culture, media and sport questions … questions to the Church Commissioners, House of Commons Commission, Public Accounts Commission, Restoration and Renewal Client Board and Speaker’s Committee on the Electoral Commission … business questions to Leader of the House Lucy Powell … a select committee statement on the first report of the Housing, Communities and Local Government Committee, “England’s Homeless Children: The crisis in temporary accommodation” … a backbench debate on the impact of digital platforms on U.K. democracy (led by Alliance MP Sorcha Eastwood) … and a debate on access to sport and P.E. in schools (Labour MP Leigh Ingham). Lib Dem MP Tom Gordon has the adjournment debate on adoption breakdown.

 

HOUSE OF LORDS: Sits from 11 a.m. with royal assent of the Church of Scotland (Lord High Commissioner) Act 2025, Terrorism (Protection of Premises) Act 2025, National Insurance Contributions (Secondary Class 1; Contributions) Act 2025, and Non-Domestic Rating (Multipliers and Private Schools) Act 2025 … questions on a poll which found that one in five people aged 18 to 45 in the U.K. prefer unelected strong leaders to democracy, reducing reported delays in holding funerals, and ensuring that aid reaches those affected by the earthquake in Myanmar … urgent question on NHS pensions and Bosnia-Herzegovina … a statement on sentencing council guidelines … a debate on the impact of the government’s economic and planning measures on farming and rural communities … a short debate on NATO withdrawing from the Ottawa Treaty on anti-personnel landmines and the Convention on Cluster Munitions … and a debate on the affordability of net zero by 2050.

 

**After Trump’s tariffs announcement yesterday, EU-U.S. relations are entering a new chapter. Join our online debrief later today at 4 p.m. CEST with editors from Brussels, Washington and London to get all the details and political consequences. Register here.**