Donald Trump just made UK’s decision-making a whole lot harder

Good morning. Westminster and the world are waking up, whether metaphorically, or in my case, literally, to the return of Donald Trump. (You can follow that story on our liveblog here.) Keir Starmer has congratulated him on his “historic election victory”.

There are a lot of striking parallels between Starmer’s government and Harold Wilson’s 1964 to 1970 administration. But the most important thing may be this defining difference: Wilson’s Labour government was able to benefit from reduced defence and military expenditure as the country ceded control of almost all of its colonial possessions and withdrew from many of its military obligations, in a decade that marked the final transfer of much of the UK’s global responsibilities to the US.

Defence spending is almost certainly going to have to rise further than planned in Britain — and I’m not sure that either political party is really ready for that conversation beyond platitudes from the opposition about cutting foreign aid to reducing inefficiencies from the government.

Trump’s favourite word ‘tariff’

If Trump does the things he has pledged to do on foreign and trade policy, then the prospects for any incumbent government being re-elected over the coming years look pretty thin, I would say.

He has vowed to impose a tariff of up to 20 per cent on all US imports and a 60 per cent penalty on Chinese goods — while the EU is planning retaliation in a two-step trade plan. If Trump keeps his word on tariffs, an area where the sitting president has few real constraints, then the IMF forecasts the effect could wipe 0.8 per cent from global economic output next year and 1.3 per cent in 2026. The fund’s scenario is optimistic because it assumes a fairly modest retaliation, which may prove unlikely given the electoral imperative some countries will feel to be seen to “hit back”.

Given our size and our openness to the world, the UK would be particularly affected: the National Institute of Economic and Social Research projects that the resulting trade war could lower UK economic growth by 0.7 per cent in the first year.

Coupled with the upward pressure on defence expenditure, the outlook means that the government’s looming comprehensive spending review in the spring just became considerably more difficult. The moment of truth in the government’s spending plans in 2027, when they face further difficult choices about tax and spend, has become harder too.

For the Labour government, it complicates its task in foreign, economic and trade policy. All in all, it means that Kemi Badenoch’s chances of winning the next UK general election have surely increased considerably this morning.

Now try this

I’m off to the Cotswolds for my wedding anniversary for a few days, but the newsletter will continue without me. See you all on Monday!

Top stories today

• Off the books | The Treasury breached its legal obligations by failing to disclose a potential £9.5bn overspend by UK government departments in the run-up to the March Budget, the head of the fiscal watchdog said yesterday. 

• Tube strikes cancelled | Strikes planned on the London Underground this week and next have been called off after last-minute talks between union leaders and the UK capital’s transport authority.

• Friends in the tent | New Tory leader Kemi Badenoch has promoted former policing minister Chris Philp to shadow home secretary as she rewarded both allies and rivals with prominent front-bench roles. Long-standing friends and many rising stars who endorsed her early in the race were heavily weighted among her shadow cabinet line-up.

• ‘It might be quicker for us to go back to court’ | Alan Bates, the lead campaigner in the UK Post Office Horizon scandal, has threatened further legal action to secure redress for victims unless a deadline for payouts is set.

• Better treatment | A long-awaited mental health bill to end the use of prison cells for people in crisis and limit the detention of those with autism and learning disabilities will be introduced by the government today.