Jonathan Reynolds: US Criticism Of Beijing’s Economic Policy Is “Reasonable”

Jonathan Reynolds (Photography: Tom Pilston)

Sophie Church

@sophiealichurch

The UK can help Donald Trump take on China, and criticism of Beijing’s economic policy is “reasonable”, says Business Secretary Jonathan Reynolds.

Insisting that the government remains optimistic about concluding a trade deal with the US, Reynolds offers caveated support on efforts to rebalance trade with China.

Reynolds tells The House that he “could not endorse the approach to tariffs that the US has taken”. However, he adds: “Where they are talking about a global economy where China makes a third of everything – soon, perhaps, as high as half everything produced in the world – it only consumes itself a fraction of that, about 12 or 13 per cent of global consumption.

“That’s not a sustainable position. I think they’ve got some reasonable criticism of that.”

We have to move on in terms of single market or customs union membership

Since returning to the White House, President Trump has waged a fierce and far-reaching tariff war against his country’s global trading partners. But while the US president has climbed down from high “reciprocal” tariffs on certain nations, he has hiked them yet further on China.

Tariffs on imports from China into the US have now climbed to 145 per cent, while Beijing has hit back with a 125 per cent tariff on US goods.

Reiterating that the UK does not agree with the route the US has taken in addressing China’s current trading balance, the Business Secretary says the UK, along with “other European countries and western allies”, should “always be willing to engage with the US” around the substance of these concerns.

“It would be wrong to assume that’s just about one president or one administration – there are complaints across the political spectrum in the US about how some of these key relationships have evolved. I think we can be a partner in the solutions to some of those,” he says.

“When we’ve got overproduction in some parts of the global economy – countries producing more than they need specifically to put those products on global markets – obviously that affects us as well.”

The UK is now racing to cement its own trade deal with the US before signing off wide-ranging agreements with the EU this month. The ordering matters: if the UK were to sign a deal with the bloc beforehand, a Trump administration that has turned cold on the EU could be less open in negotiations, officials fear.

But according to The Guardian, the UK has been bumped down the priority list – with talks between Asian countries such as South Korea, India and Japan likely to take precedence.

The Business Secretary claims that the UK is “in an optimistic place” with the US-UK trade deal, however.

“In terms of the engagement from the US, they have been exceptionally true to their word from the beginning. Despite the fact that lots of countries around the world are engaged with them, or seeking to be engaged with them, they are available to us.”

Reynolds names US commerce secretary Howard Lutnick, US trade ambassador Jamieson Greer and the president’s special envoy to the UK Mark Burnett as key facilitators of the trade deal. Burnett, who Reynolds met with during the last week in April, has been “really constructive and helpful in his role”.

“They have been and are true to their word in terms of their availability. I’ve no complaints or objections on the bandwidth,” he says.

Reynolds says the “facts bear it out” in claiming Trump favours the UK. While the UK faces a 10 per cent tariff on exports to the US, the EU was initially hit with a 20 per cent tariff as one of the president’s “worst offenders”.

“Clearly they haven’t got with us what they’ve got with China or the EU,” says the Business Secretary. “There’s been the basis for that productive and helpful discussion.”

With JD Vance’s Munich speech ringing in the ears of EU leaders – where the US Vice-President harangued Europe for restricting free speech and loosening immigration controls – the upcoming UK-EU summit will be crucial for turning warm words of unity into concrete action.

It is likely the UK will roll over the current arrangements on fishing in return for access to the EU’s €150bn defence fund. The government also hopes to revive a youth mobility scheme with the EU, come to a deal on carbon emissions, and find a sanitary and phytosanitary (SPS) agreement.

The first of its kind since Brexit, will the summit open a rolling set of negotiations with the EU?

“I’m not sure I would describe it as permanent negotiation; there are things we want to be able to come to agreement with in the short term,” Reynolds says.

He refuses to “give a running commentary” of which topics will take precedence in discussions, however. Nor is he willing to give any detail on specific options on the table for the EU youth mobility scheme – whether there will be a cap, a one-in-one-out system, or a restriction to certain sectors.

When we’ve got overproduction in some parts of the global economy, obviously that affects us as well

While the government has been trying to access parts of the single market – the Financial Times reports that Starmer is aiming to cut red tape for British businesses sending goods into the bloc – the EU has spurned these advances.

Today, Reynolds doubles down on the UK’s disinterest in rejoining the single market.

“There’s no desire on our part to get into those questions,” he says. “I think we have to move on in terms of single market or customs union membership – our red lines in our manifesto and in our negotiations are really clear on that.”

On Boris Johnson’s Brexit deal, however, the Business Secretary is clear: “The TCA with the EU can be improved upon.”

He is also quick to deride previous Conservative governments for their handling of China. In April, the government recalled MPs to Parliament to vote on bringing Scunthorpe steel plant under its control, after the site’s Chinese owners Jingye looked set to let the furnaces go cold.

Given the importance of maintaining a sovereign steel capability – the UK would be the only member of the G7 group of leading economies without the ability to produce virgin steel if Scunthorpe had closed – Reynolds says “we’ve got to be reflective” of the previous government’s decision to bring in Jingye.

He also blames the “very naive golden era” of warming UK-China relations under David Cameron.

While the Chinese government accused British politicians of “arrogance, ignorance and a twisted mindset” after they criticised Jingye, Reynolds is reluctant to wade into a conflict with China. The Business Secretary will visit the country later this year.

“We’ve got to make a distinction between the specific situation with steel and Jingye, and not necessarily make that an issue about the UK and China,” he says.

“I think the crucial thing with China is to recognise you can neither pretend that they don’t exist nor be where the UK was with the early period of the last Conservative government.”

He adds: “It’s not like the relationship, I would say, to almost any other country. But it’s a mistake to try and think of it in absolutist terms either side. There are areas where we should be working closely together with China, and there are areas that are more sensitive, and we’ve got to bear that in mind.”

In the wake of the Scunthorpe steel works situation, talk has turned to the access Chinese companies have to British energy infrastructure. While this is surely a “more sensitive” area, the government is now considering Chinese firm Mingyang Smart Energy as a supplier for wind turbines in the North Sea – potentially giving China an on/off switch to our energy sources, or a physical platform on which to mount spy sensors.

The Business Secretary insists our wind farms are “not particularly exposed to Chinese investment”.

“Most of that is European, or if it’s from further afield, countries like Indonesia or Malaysia have a role in the supply chain. So, for instance, Mingyang is a big Chinese wind company. We’ve not got that significant exposure in the existing system.

“The approach the UK takes is one of national security. Investment decisions are about the sector, and [the UK] is agnostic, in that sense, towards the country. That is the best way to do it. You do it on the merits of each of those decisions.”

So he’d have no qualms, then, in allowing Chinese companies access to our energy infrastructure?

“I wouldn’t put it like that,” he says carefully. “I’d say you consider each of those cases on its merits.”

With the UK coming to terms with its status as a middling economic power, while watching its traditionally reliable trading partners become less so, Labour has a difficult course to plot.

But the Business Secretary only sees opportunity.

“Envisage, as I do, a position where the UK is able to do the EU reset, which is clearly important, the trade deal with India, the one we negotiated with the Gulf, and come to an agreement with the US, which I think is possible,” he says. 

“If we can deliver that, the UK in a really challenging global environment becomes a country with a real competitive advantage.” 

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