A non-free-trade accord between Britain and the United States, contrary to the extensive commercial arrangement envisioned by Brexit supporters.
Laid-Back Guide to the UK-US Trade Deal
Amidst the chaos of the Champions League, UK leader Keir Starmer got a call from Donald Trump – a move that whiffed of Trump's signature last-minute bluff to wring more out of Boris, this time regarding trade. Starmer, along with his business secretary Jonathan Reynolds, found themselves dining with industry bigwigs across London, seeing this as a golden opportunity to strike a deal.
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The Deal's Fineprint
The hastily announced agreement, delivered via a Trump conference call, is not the Brexiteer's dream broad trade deal nor a free trade agreement. Instead, it's a narrow one, providing immediate relief for a handful of endangered sectors, including the car industry, mere days before potential job losses at major UK brands like Jaguar Land Rover.
For the car sector, which was facing a 25% tariff, a 10% tariff will apply to a quota of 100,000 vehicles per year, though this still leaves the industry worse off than before "liberation day." But with one-quarter of exports crossing the Atlantic, ministers argue it's better than no deal at all, and crucially offers more favorable terms than any significant US trading partner can claim.
Other sectors seeing results include steel and aluminum, with zero tariffs secured, and a pledge to work with the US in preventing Chinese dumping – a win for these struggling industries, though modest in scale, with US exports amounting to only around £400m annually.
Trading Goods and Chow
In exchange for these concessions, the UK has agreed to open the doors to food and agricultural products, starting with beef and ethanol, used for both fuel and food production. In place of tariff quotas on beef, 13,000 tonnes of tariff-free beef can now flow between the UK and US, accounting for about 1.5% of the UK market.
However, the most significant wins come from maintaining the UK's stringent sanitary and phytosanitary (SPS) production standards, which prevent the sale of hormone-treated meat. The US's hint toward "no chemical" European standards could pave the way for easing SPS checks on trade with the EU, making it a valuable reduction in red tape for the UK in its ongoing negotiations with Brussels.
Tech Deals in the Works?
The agreement also promises broad commitments to cut deals on technology, AI, and an "economic security blanket," with the US promising "preferential terms" when it comes to pharmaceuticals and other sectors. Unfortunately, there's still no word on proposed film tariffs.
All told, officials describe these moves as "banking sectoral wins" while they continue to negotiate the remaining tariffs. But beware, Trump's "reciprocal" tariff is far from reciprocal, as it leaves UK exporters in a materially worse position than before April's call – better than pre-call, mind you, but far from ideal.
Will Trump Renegotiate the Remaining Tariffs?
Faced with the challenges of extracting Trump from his protectionist, capricious stance, Sir Keir will certainly hope for a comeback in the second leg. Only time will tell if he can turn it around.
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The Skinny on the UK-US Trade Deal:
This recently announced trade deal includes several critical sectors, such as the car industry, steel and aluminum, food and agricultural products, and technology. Here are the key details, benefits, and potential challenges of the agreement:
Key Details and Benefits
- Car Industry: -improved competitiveness in the US market -increased market access -controlled tariffs for 100,000 vehicles per year
- Steel and Aluminum: -easing of tariffs -preventing Chinese dumping
- Food and Agricultural Products: -opportunities for U.S. farmers and ranchers -estimated £5 billion in new export opportunities -benefits for commodities such as ethanol, beef, and other agricultural products
- Technology and Other Sectors: -high standard commitments in intellectual property, labor, and environment -potential long-term benefits to various industries
Potential Challenges
- Remaining Tariffs: The deal only addresses a portion of the tariffs, leaving the rest unresolved. How Trump will renegotiate the pending tariffs is uncertain at this time.
- Trade Imbalance: The UK remains in a worse position compared to the start of negotiations, though better than pre-negotiations. Whether this will change in the future is yet to be seen.
- Compliance and Enforcement: Ensuring both parties adhere to the terms of the agreement will be crucial to its success.
Overall, the deal presents opportunities for growth and competition in various sectors, but the full repercussions will become clearer as negotiations progress and the market begins to adapt.
- Brexiteers, despite wishing for a broad trade deal, are now left with a narrow one, as the UK-US agreement lacks the characteristic of a free trade agreement.
- Amid the complexities of the auto industry, where a significant portion of exports cross the Atlantic, the trade deal offers some relief with a 10% tariff on vehicles, though this quota of 100,000 vehicles still leaves the sector worse off than before.
- In a move that raises concerns for those opposed to hormone-treated meat, the agreement allows for 13,000 tonnes of tariff-free beef to flow between the UK and US, which is just about 1.5% of the UK market.
- Interestingly, ministers are banking on sectoral wins in technology, AI, and pharmaceuticals, as the deal promises preferential terms in those sectors, but there's no news yet on proposed film tariffs.
- Arguably the most crucial aspect of the deal is the mantaining of UK's stringent sanitary and phytosanitary (SPS) production standards, which could potentially pave the way for easing SPS checks on trade with the EU, a characteristic of significant importance in UK's ongoing negotiations with Brussels.
