12 Things Labour Will Actually Do on Trade

Probably

It’s looking pretty likely that Labour will win the UK general election on Thursday. This means now is probably the right time for this newsletter to look at what Labour’s approach to trade will be.

In a departure from most of the other pieces in this space, which are largely a wish list focused on deepening economic ties with the EU, here’s 12 things Labour will [probably] need to deal with:

1.        Donald Trump. Trump is now the favourite to win the US election in November. In all probability, if he does win, Labour is going to have to deal with the return of US tariffs. These could take multiple forms. For example, Trump could decide to impose a 10 per cent universal tariff plus a higher tariff on China and exempt only those allies that follow his lead on the latter. What does Labour do in such a scenario? Does it fall in with the US, or not? Trump may also decide to reimpose Section 232 tariffs on UK steel and aluminium exports to the US (currently the UK benefits from a UK-specific quota). What does Labour do? Does it hit back with its own, currently suspended, retaliatory tariffs on motorcycles, blue jeans and other products? What about the on-ice Boeing-Airbus dispute? Retaliatory tariffs are currently suspended until June 2026 … but what then?

2.        EV Tariffs. The US has applied tariffs to Chinese EVs (100+2.5 per cent) and excludes them from IRA subsidies; the EU anti-subsidy investigation into Chinese EVs has resulted in proposed tariffs of between 17.4 to 38.1 per cent (on top of the existing 10), and Canada has launched a 30-day consultation into applying its own tariffs. Of the G7, that leaves the UK and Japan tariff-free … and Japanese consumers aren’t really that into pure EVs. So what’s the UK going to do? I’ve written before about why trade defence tariffs create a domino effect, and how one country imposing tariffs increases the pressure on others to guard against trade diversion. So what does Labour do? Is it happy with the UK being the most open [in practice] G7 economy? Does it impose tariffs too? Given the UK auto industry is mixed on the question, and other exporters are wary of retaliation, who does it listen to? How would tariffs impact its other decarbonisation objectives? Would tariffs incentivise investment in the UK? Questions, questions, questions. If it does go for tariffs – how? [See point 4.]

3.        E-bikes. As I covered a few weeks back, the UK’s Trade Remedies Authority has provisionally recommended removing anti-subsidy tariffs on imported Chinese electric bikes, arguing that cheap bikes are in the best interest of consumers. This line of argument is controversial [again, see point 4] and, while supported by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, has been received badly by Brompton, Orbea and Raleigh UK. The TRA will make its final recommendation in September, at which point Labour will need to decide whether to follow the TRA’s advice, go with one of the alternatives, or ignore it.

4.        Reform the TRA. If Labour decides it does indeed want to start tariffing things, as per points 2, 3 and arguably 1, the TRA as it is currently set up poses a bit of a problem. I’ve written a fair bit about the trials and tribulations of the TRA – sample here – but the main issue for Labour is that, as per the intention of its founder Liam Fox, TRA investigations – and in particular its application of an economic interest test – are structurally designed to make it difficult to levy defensive tariffs [cf the e-bikes case]. If the TRA were to investigate imported Chinese EVs for example, it is quite probable that the TRA would find that tariffs are not in the UK’s interest. A Labour government could ignore this recommendation, but doing so would be a bit embarrassing. So does it leave the TRA as it is? Or does it change the mandate?

5.        CBAM. The UK has committed to introduce its own carbon border adjustment mechanism by January 2027. But the design and scope is still slightly up in the air. In addition, the UK steel industry would like the CBAM to kick in earlier to avoid a scenario in which the EU’s CBAM is in full effect (from the beginning of 2026, although I reckon this could slip) and the UK’s is not, thus risking lots of carbon-intensive steel being dumped on the UK market. So what’s Labour going to do? As an aside, Labour will also quickly come under pressure to link the UK’s Emissions Trading System to the EU’s, to ensure UK exports of covered goods are exempted from the EU CBAM.

6.        Fishing quotas and energy. From 2026, the UK will need to negotiate fishing quotas with the EU on an annual basis. That will be fun. Completely coincidently, honest, the energy cooperation provisions in the EU-UK Trade and Cooperation Agreement expire at the same time. So that will be even more fun.

7.        CPTPP. The UK accession, subject to one more ratification, is pretty much wrapped up, but Labour will still probably need to ignore some calls from NGOs and unions to try and renegotiate stuff and/or leave it. More interesting is CPTPP’s function as a negotiation rachet – even if Labour has no interest in negotiating any new FTAs, CPTPP membership will force it to engage in accession negotiations with new entrants. At the moment, the list includes China (!), Taiwan (!!), Ukraine (!?!), Costa Rica and Uruguay but others such as Thailand and Indonesia have expressed an interest.

8.        Upgrading rollover agreements. Labour will need to decide what to do about a few legacy rollover agreements that are currently being renegotiated for one reason or other – Canada, Mexico, South Korea, Switzerland and Israel. It can probably slowwalk a couple of these – Mexico, Switzerland, Israel – but it might want to de-escalate tensions with Canada (the UK is currently arguing with them about cheese and beef hormones) and South Korea needs to be resolved by the end of 2025 to avoid a rules of origin cliff edge for UK exporters.

9.        Decide what to do about new FTAs. The UK is negotiating new FTAs with India and the Gulf Cooperation Council (GCC). Labour has said it would like to keep these going, but in practice finalising a deal will be difficult if only because Labour-affiliated folk are likely to make a much bigger deal about sustainability and labour rights issues (applies to both) and also getting any decent market access out of India is really really hard. Even if the negotiations are not going anywhere, it is probably in Labour’s interest to drag the negotiations out for a bit longer if only to say they tried.

10.  BTOM. After multiple delays, the UK finally started applying controls on EU-originating animal products earlier this year. The third phase of implementation is scheduled for 31 October, an would see safety and security declarations required for *all* imports from the EU. This will impact everyone, rather than just food importers, and I guess it’s possible that some push for a further delay. Also, as a complete aside, Labour could, in the medium term, try to do away with these entirely by negotiating an arrangement with the EU similar to Switzerland and Norway. Who knows.

11.  Deforestation. While everyone [well, countries such as Brazil and Indonesia] has been losing their mind over the EU’s new anti-deforestation rules, the UK has been quietly designing its own version. One of the first things placed on a new Labour DEFRA secretary of state’s desk will be the secondary legislation setting out exactly how the UK will go about it. This will probably be controversial. Current industry complaints include the fact that the scope isn’t particularly clear (unlike the EU, the UK hasn’t published a list of commodity codes) and will apply to organisations throughout the supply chain with a turnover of over £50 million (also unlike the EU’s, which only applies to the importer).

12.  Northern Ireland stuff. Like, there’s gonna be stuff.

That’ll do for now.

Sam