Quick Post-Brexit Trade Deal With U.S. Unrealistic, Hammond Says

(Bloomberg) -- Chancellor of the Exchequer Philip Hammond warned the next prime minister the U.K. won’t be able to secure a quick trade deal with the U.S. after Brexit.

“We should be ambitious, but I think we’ve got to be realistic that we’re not going to do it in five minutes,” Hammond said in an interview with CNBC on Monday, adding that a trade deal “can be done.”

Hammond’s comments came after the Times newspaper reported that Boris Johnson, the front-runner in the U.K. leadership contest, plans to prioritize relations with President Donald Trump and seek a limited trade deal with the U.S. as part of his “do or die” strategy to leave the European Union on Oct. 31.

The chancellor said he expects a trade deal to be tricky on issues including agriculture and animal welfare standards, and said President Donald Trump is a tough negotiator.

“What I hear the president say is ‘America first,’ and the president’s idea of a trade deal may not entirely coincide with some people’s idea in the U.K. of a trade deal,” Hammond said.

Hammond will also meet his U.S. counterpart, Steven Mnuchin, at this week’s Group of Seven finance ministers’ meeting in Chantilly, France, he said. Ministers are expected to discuss digital taxation and Facebook’s new Libra currency. The U.K. government plans to engage with Facebook to ensure its crypto-currency is properly regulated, rather than trying to stop it.

‘Great Risk’

“It’s potentially a positive, transformative step but it also has the potential to deliver great risk into the system,” Hammond said. On digital taxes, he said the U.K. is hoping for an internationally agreed solution, but -- along with other countries including France -- it is producing its own until that happens. The government included a 2% tax on digital revenue in its draft finance bill last week.

The G-7 talks are expected to be Hammond’s last major international meeting as he’s said he’ll step down when the new prime minister takes office on July 24. Johnson is expected to hold off the challenge from Foreign Secretary Jeremy Hunt; the two rivals are scheduled to take part in a debate on Monday evening.

In a further warning to the incoming premier, Hammond said he will work as a backbench member of Parliament to prevent him from taking the U.K. out of the EU without a divorce agreement. He pointed to the difficult parliamentary arithmetic -- the minority government relies on the Northern Irish Democratic Unionist Party to govern -- as proof of the influence he expects to have.

Hammond has previously cited cross-government analysis that showed the public finances would take a 95 billion-pound ($119 billion) hit by 2035-36 in a disruptive no-deal Brexit scenario.

“If the new prime minister tries to drive the U.K. over a cliff-edge called no-deal Brexit, then I will do everything I can to stop it,” Hammond said.

To contact the reporter on this story: Jessica Shankleman in London at jshankleman@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Stuart Biggs, Thomas Penny

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