President Donald Trump is threatening to launch a damaging new trade war with the United Kingdom as the country prepares to leave the European Union.
In recent weeks, the president and his allies have issued a series of threats to the UK on everything from telecoms to vehicle tariffs to security cooperation.
Meanwhile, the UK Parliament on Wednesday voted to ratify Prime Minister Boris Johnson’s Brexit agreement with the EU, paving the way for Britain’s exit on January 31.
As Johnson prepares to seek new trade deals outside the EU, the Trump administration is poised to take advantage of the UK’s vulnerable new position on the world stage.
Trump threatens the UK on tax
Johnson’s administration has pledged to implement a 2% tax on the revenue that tech companies such as Facebook and Google make from users in the UK starting this April.
The levy is designed to target international companies that the UK government believes use their position to avoid taxes in the UK.
Johnson’s spokesman said at a press briefing this week that these companies, most of which are based in the US, were “undermining public trust and confidence in our economic system.”
However, US Treasury Secretary Steve Mnuchin responded to what the UK has described as a “proportionate” tax by threatening a new trade war with the UK over the issue.
“If people want to arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies,” Mnuchin said this week at the World Economic Forum in Davos, Switzerland.
The automotive industry is a key part of the UK economy, and almost a fifth of overseas sales of UK vehicles go to the US.
Johnson’s spokesman said that such a trade war would “harm businesses and consumers on both sides of the Atlantic.”
The UK’s international trade secretary, Liz Truss, was also bullish on the issue, saying on Thursday that the UK’s policy was “not a matter for the US,” “not a matter for the EU,” and “not a matter for anybody else.”
Trump threatens the UK on security
Threats of a new trade war could escalate if the UK government pushes ahead with its plan to defy Trump and strike a deal with Huawei, the Chinese telecoms company building a 5G network.
Trump has warned the UK that the intelligence-sharing arrangement between the two allies would be at risk if the deal goes ahead, with US officials saying last week that Trump “is watching closely.”
However, Johnson has suggested he would allow the Huawei deal to go ahead despite Trump’s threats, telling the BBC last week that “the British public deserves access to the best possible technology.”
He added: “If people oppose one brand or another, they have to tell us, what’s the alternative?”
Phil Hogan, the EU trade commissioner, said at an event in London last week that the president’s threat was simply not credible.
“I don’t think that will happen at the end of the day,” he said.
“You can call their bluff on that one.”
Trump threatens the UK on Iran
The United Kingdom remains committed to the Iran nuclear deal despite Trump’s pulling the US out of the agreement in 2018.
Johnson last week joined with other European leaders in signing a letter endorsing the deal, which they see as the best chance of bringing Iran back into the fold and preventing a devastating conflict with the US.
However, Trump’s threats to impose 25% tariffs on European vehicles appear to have played a part in forcing those European countries to invoke the deal’s dispute mechanism, which could ultimately cause it to fall apart.
Johnson’s administration has repeatedly criticized Trump’s stance toward Iran, with the prime minister earlier this month warning that the president’s threat of targeting Iranian cultural sites could be a war crime.
Now, as Britain prepares to enter new trade negotiations with the US, the threat of more punitive trade retaliation by Trump looms over the UK.
The UK threatens Trump on defense
Johnson’s administration hit back against Trump’s threats earlier this month with a threat of its own.
Defense Secretary Ben Wallace told The Sunday Times that Trump’s isolationist foreign policy meant the UK was considering drawing back from its long-standing defense alliance with the US.
“Over the last year we’ve had the US pullout from Syria, the statement by Donald Trump on Iraq where he said NATO should take over and do more in the Middle East,” Wallace said.
“The assumptions of 2010 that we were always going to be part of a US coalition is really just not where we are going to be.”