The former deputy prime minister said the Brussels bloc would dictate on what terms Britain traded with the union.
Speaking on LBC, the arch-Remainer added a deal would be down to the “good will” of the German chancellor.
Lord Heseltine said: “What’s essentially going to happen is that the Europeans are going to tell us the terms on which we can trade in our largest home market.
“We can either leave it, in which case we have no deal, which is a disaster or we can accept that they can dictate the terms.
Lord Heseltine said an EU trade deal was down to Angela Merkel's "good will"
We are now going to find ourselves dependent among the willingness of the German Chancellor
“The key to this, and this is the irony of it, which is very unpalatable to me and to many people, the irony of it is the ability to find and accord a new arrangement depends upon Angela Merkel’s good will.
“In other words, we are now going to find ourselves dependent among the willingness of the German Chancellor to influence her European colleagues to give us a deal of some sort.”
Lord Heseltine has also claimed Mrs Merkel’s country would “win the peace” after the UK’s role in the Brussels bloc is diminished following Brexit.
And he insisted it was “quite unacceptable” for the “former enemy” to dominate politics on the continent any longer.
Meanwhile, Jean-Claude Juncker has threatened Donald Trump to stop his anti-EU rhetoric or risk starting a war within Europe.
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The President of the European Commission, 62, warned the United States government to stop stirring up trouble, after Mr Trump praised Brexit.
He spoke with Vice President Mike Pence and said: “Do not say that, do not invite others to leave, because if the European Union collapses, you will have a new war in the western Balkans."