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While Britain’s reintegration with its largest trading partner still seems like a gamble, newly-elected US President Donald Trump’s aggressive trade agenda could change that calculus.

When Bailey became governor of the BoE in 2020, he made clear his determination not to get caught up in Brexit, Britain’s thorniest political issue. That’s why his recent statements were notable.

In a speech to London’s financial community on November 14, Bailey said Britain “must be alert and welcome opportunities to rebuild relations with the EU.”

A few days later he gave evidence to a parliamentary committee, saying: “I find it difficult to understand people who say we should implement Brexit in the most hostile way.”

On both occasions, Bailey delivered his usual stance on not taking a position on Brexit, but his language was blunter than BoE watchers are used to.

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Does this mean a policy change is coming? It’s a difficult question.

On the one hand, the country’s fiscal policymakers continue to suggest otherwise.

British Chancellor of the Exchequer Rachel Reeves, speaking at the same event in the City of London as Bailey, reaffirmed the Labor government’s position that it would not consider rejoining the EU’s single market or customs union the EU.

This position is not surprising. Although Labor won a huge majority in Parliament in July, its 34 percent share of the vote was low. That vulnerability could make the government reluctant to revisit Brexit and potentially revive centre-right and right-wing opposition groups.

On the other hand, the Labor government could be forced to rethink Britain’s relationship with the EU, despite the complicated politics, as Donald Trump returns to the White House.

If the new US president means what he says about imposing tariffs of 10 to 20 percent on all goods imported into the US, Britain’s fragile economy could take a major hit.

The National Institute of Economic and Social Research estimates that tariffs of that magnitude will roughly halve British growth over the next two years, pushing inflation 2 to 3 percentage points higher and necessitating higher interest rates.

Furthermore, the EU, Britain’s largest market, would likely retaliate with tariffs of its own, sparking a trade war with potentially devastating consequences.

So Britain would face a difficult choice: strike a bilateral trade deal with the US or join the big market on its doorstep.

Politics aside, economics seems to favor the EU because, even in a globalized 21st century, proximity remains a fundamental driver of trade.

Although Britain’s trade balance with the EU has deteriorated since the Brexit referendum, the EU still accounted for around 40 percent of British exports of goods and services in the first half of 2024 and just over half of the import.

By comparison, the US represented less than a quarter of all UK exports and less than 15 percent of imports.

Yet Britain may be wary of disrupting its “special relationship” with the world’s largest economy.

And the Trump administration could be interested in a bilateral trade deal. Stephen Moore, an economic adviser to Trump, said last week that Britain should reject the EU’s “socialism” in favor of US free enterprise.

“If that were the case, I think it would boost the Trump administration’s willingness to honor the FTA,” Moore told the BBC.

But previous negotiations suggest that a deal would require Britain to open its markets to American agricultural products, which have very different standards than those in Britain. The country’s National Health Service could also be forced to charge US pharmaceutical giants more for their drugs.

Neither sounds politically popular and both could create further barriers to trade with the EU, further eroding this trading relationship.

Bailey told the House of Commons Finance Committee on November 19: “Free trade is not about choosing one area over another.”

That may be true, but world trade seems to be less free by the day. That means Britain will have to make some tough choices, including about its relationship with the EU, because the status quo may no longer be an option.

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The writer is a former head of communications at the Bank of England and a former editor-in-chief at Reuters.