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Why would we want to rush into a deal that preserves our 50 billion euro trade deficit with Germany? Don't you think that imbalance is a bit of a problem?
You do acknowledge that tariffs would change the trade that goes on, but you begin your analysis of their effects from the assumption that they wouldn't, which i think is nuts. The Germans won't much adjust their prices to adsorb the tariffs, so the extra will be paid by UK purchasers, making us all feel poorer. As we export so little to them, they'll barely notice paying extra for our stuff, and our devaluing currency will soften that further.
Actually the trade imbalance has been causing Germany problems too, leading to too much saving - driving down the interest rates for pensions, inflating asset bubbles and generally destabilising their banks and the the weaker eurozone economies. It would be much better for everyone if their trade surplus could be recycled into productive capital investments in the deficit economies. But we've voted ourselves out of the possibility of any such rational arrangements.
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moth
@Airhead
The Germans have a €50bn trade surplus with the UK. Do you think that they will be keen to exclude us from trading with them? We are their 2nd largest trading partner by surplus, 2nd to the USA.
If it comes down to the wire over free movement of labour (I think free movement of people is easier to achieve) do you think the Germans will want to lose €50bn euros, or at least have their products take a hit on €50bn euros worth of import duty. Say we implement 10% import tax on German products and they implement the same on ours. Our exchequer collects €5bn more than theirs, assuming their products still sell at the same rate (that's enough to pay for Scotland if they stay).
So I think we can accept that there will be a desire to negotiate trade deals at least with the most powerful economic power in Europe. The bluster about exclusion from the single market is fine and expected but there's too much at stake for the economies of the countries involved to leave the politicians to enforce their idealism.
However the battle will be over which countries want which industries and jobs. In this case the latest EU attack on Ireland regarding Apple should help the UK. We could remain popular by pricing ourselves just below the competition which might have to effectively apply a flat tax across Europe.