A fork in the road

The media are on fire with speculation about the consequences of Donald Trump's sweeping new tariffs which echo disastrous US policies of the 1930s. These tariffs have been imposed with little or no consultation and with threats of escalation in the event of countermeasures. The examples of Canada, Germany and Taiwan show no recognition of past cooperation, support and friendship; the example of Russia show no consequences for bad behaviour. Europe as a whole is characterised as a bunch of spongers exploiting US generosity. The EU in particular is singled out as an arch-exploiter. This approach breaks trust and commitments established over decades and even if compromises on reduced tariffs are agreed quickly, trust will take much longer to restore. Nevertheless, and despite big risks, this dramatic fork in the road offers important options for the rest of the world, and some major opportunities.

The option for the 42 democratic European nations is either to work closely together or face economic fragmentation driven by the US, and military fragmentation driven by Russia. The main European powers have already signalled that they plan to strengthen and unify their military capability. With a population and GDP exceeding that of the United States, democratic Europe is able to rival the US economically, and to continue previous international trade policies with the rest of the world. There is also no reason why democratic Europe should not organise its own technology renaissance, possibly with the help of a brain drain of scientists leaving the US.

The UK is heavily entwined with the US in military and economic terms. The Labour government has taken steps to revive a stagnant economy and establish its financial freedom of action, but still needs time get control of dire national and local government debt levels, and for the economy to start to grow. It would probably like to avoid choosing between the US and Europe right now but faces difficult choices in terms of NATO restructuring, and will have to think carefully about economic alignment and trade deals.

As we all worry about these big, evolving issues, the Industry Forum is continuing to plan our programme of meetings which we hope will contribute to the economic health of UK businesses. Our next scheduled event is our spring reception which will provide more opportunities for members to meet people in the still-new administration.