Paul Teasdale questions why the PM keeps making poor economic policy decisions in his pursuit of right-wing voters
At the start of 2026, Starmer wanted to talk about the economy: this was to be the year when “people begin to feel the difference in their pockets” (speech 5 January). Number 10 probably thought this area should favour the Government because, for some time, the right has had little to say on economic policy; the big idea of leaving the EU has failed to deliver anything positive, and they can now only complain about high taxes and benefits.
The big drawback of this initiative was that Labour ministers are surprisingly poor at talking about the economy. Starmer used to say that “Growth is the number one priority of this government” (Downing Street Garden, 27 August 2024), but his actions speak differently. In his pursuit of right-wing voters, he has repeatedly made policy choices that damage growth. First, his refusal to talk openly about the damage done by leaving the EU. Then, before the election, there was the decision not to raise personal taxes (the “Ming vase strategy” attributed to Mandelson), which has left the public sector short of funds. More recently, Starmer has said he wants to further reduce net immigration (The Standard, 27 November 2025) to levels that would damage GDP growth and reduce government revenue below the OBR forecasts.
The Prime Minister has been reluctant to talk about the economic costs of leaving the EU. He talks of “making Brexit work”. In the Budget debate in 2025, Ed Davey noted Reeves’ reluctance to address the subject. He (rightly) said that any hope of economic growth or dealing with the “cost of living crisis” must have the EU at its centre.
When the world was rocked by Trump’s announcement of tariffs, British ministers should have seized the opportunity to talk about Europe and trade – and to restate the benefits of a customs union. Labour could have pointed out that the damage to the UK from Trump’s tariffs (which hit only goods) would be small compared to the mess left by the refusal of Johnson and Lord Frost to take the time needed to negotiate a proper EU deal. The Johnson deal created a lot of non-tariff barriers for British exporters – something no other country had ever done to its own economy. Rolling that back would, quantitatively, more than offset the damage caused by Trump. Furthermore, Trump had scuppered the Johnson fantasy of a “buccaneering” Britain built on free trade.
Around the world, the response to Trump’s tariffs was very disorganised. There had been four months to prepare for the announcement, so it might have been possible for the major trading nations to have stood by a collective position, sticking to the rules and principles of the World Trade Organisation (WTO) that have guided matters for decades. They could have argued that tariffs are not rational and do not work.
Trump said that he wants to bring manufacturing jobs back to the USA. However, imports account for just a small fraction of the decline in manufacturing jobs in the USA, and “offshoring” even less. The fall comes mostly from productivity improvements. At the same time, he talks of increased government revenue, but that is possible only if the tariffs fail in their first purpose of stopping Americans from buying imports.
They are a tax on American consumers, and where a government favours revenues from tariffs, rather than income tax, they shift the tax burden onto low-income households, making them pay for Trump’s vanity. Bad in theory, there is little empirical evidence that tariffs work to stimulate domestic industry. (The main positive example in history happens to be the USA, where tariffs were established by Alexander Hamilton in the 1790s, in the time before income taxes – though they do not play a big part in the musical.)
The major trading partners might have said that they did not want to put new taxes on their own voters, so they would limit market access of US firms, e.g. excluding them from some sectors such as public sector contracts, finance, and agricultural produce. If they did want to set a tariff as a symbolic message, they might have acted together, setting the same levels on politically sensitive exports.
Defence of the trading system should have been the priority. The greatest direct loss of exports would be faced by countries geographically close and integrated with American markets (Canada, Mexico, the Caribbean) and some smaller countries with specialised exports (such as Lesotho, which exported cheap clothing). But for most of the larger and more diversified economies (including the UK), the main damage comes not from direct loss of exports to the USA, but from shrinking world trade, which bilateral deals will not undo.
We know that Trump does not plan even one step ahead (as the war with Iran shows sharply), so we can assume he was not prepared for the challenge. Resistance by trading partners would have been working alongside resistance within the USA, and in the knowledge that the tariffs would soon damage the US economy. Tariffs are Trump’s personal thing (partly because he still does not understand who actually pays the tax). There is not much support in the Republican Party, among his own supporters and even less among financial donors. (However, the Democrats would not be much help: Biden imposed tariffs and undermined the WTO.) Trump’s tariffs are illegal under U.S. law and international law. He has been forced to backtrack by financial markets, by lobbying and, more recently, the courts. There is already evidence that they have added to inflation and slowed growth. The Budget Lab at Yale has estimated that the tariffs have added $700 to annual average household bills, and that is before the full effects have been passed on to consumers. In response to rising prices, the administration has already removed tariffs on many types of food.
But, once again, Starmer’s political judgements led to policies damaging to growth. Instead of making common cause, Starmer decided to go it alone and went for sycophancy, fronted by Mandelson. He chose to distance the UK from the EU, apparently showing more concern for right-wing voters than for what he might call “the national interest”. He played along when the Tories spoke of “a Brexit benefit”. He wanted to be first at the court of King Trump and made a mistake in giving his bribe (the invitation from the King) before getting anything in return. The outcome was a weak, non-binding agreement rather than a treaty. And in the end, the same tariffs as everyone else. It’s appreciated that Starmer was, in part, motivated by wanting to keep Trump onside in Ukraine, but he does seem to overestimate the significance of the UK. Starmer cannot be a bridge between the USA and the EU if neither side respects him.
The government response has a second thread – trying to increase trade with other countries (China, India). For other countries (e.g. Canada, India, Brazil, South Korea), boosting alternative markets has been at the centre of their response. The EU is looking for new deals, and China is now able to present itself as a reliable partner and is probably the only winner from the tariffs. As an example, Canada recently agreed to slash its tariffs on Chinese electric vehicles from 100% to 6.1%.
The actions of Starmer’s Government were damaging to collective international action. In years to come it will be interesting for historians to learn whether other strategies were considered, and how they saw this one playing out. Were there any conversations with the EU? No one can say how a more robust challenge in April 2025 would have gone, but, for the observer, sycophancy and going it alone seemed bound to fail. Accepting Trump’s illegal tariffs has encouraged him to further ignore international norms, leading to the deaths of thousands and shortages around the world. No Level of self-abasement is going to satisfy him. Starmer’s idea that he could be a bridge between Trump and Europe has done further economic harm and ruined his hope for lower inflation in 2026.