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UK and U.S. ink "remarkable" trade deal, as declared by Trump. - Trump unveils groundbreaking trade pact with the UK
In a bold move, US President Donald Trump announced a significant trade agreement with the UK, hailing it as a testament to his tariff policy. "It's a massive win," Trump said at a White House press conference.
Undeterred by the EU's warning of counter-tariffs on US exports worth nearly $100 billion, Trump expressed his intention to forge a similar deal with the EU as well. This latest trade pact with the UK marks the first agreement with a major trading partner since Trump's tariff surge in early April.
A "Monumental" Victory for Trump
The US-UK trade deal, in Trump's words, is "comprehensive" but not typical. Reports from UK government circles suggest it serves as a foundation for further negotiations, focusing on specific areas rather than a traditional free trade agreement.
UK Prime Minister Keir Starmer might feel validated by his approach to avoid a showdown with the US. "This is a truly monumental day," Starmer stated during the press conference.
Auto Imports Quota and Duty-Free Aircraft Parts
Currently, UK exports face US tariffs of 10% on most goods, with rates as high as 25% on steel, aluminum, cars, and car parts. Under the new deal, a quota of 100,000 vehicles will be subject to a reduced 10% tariff, and aircraft parts from Rolls-Royce will enter the US duty-free. In return, the UK will import Boeing aircraft worth $10 billion (around €8.9 billion). Tariffs on UK steel and aluminum will be eradicated.
The US-UK trade volume was approximately €370 billion last year. However, about 70% of UK exports to the US were services, shielded from tariffs, with only around 30% being goods.
The EU's 90-Day Deadline Approaches
Trump has threatened the EU with blanket tariffs of 25% if no agreement is reached, and the current deadline is July. To date, the Trump administration has not engaged with the EU's offer to mutually lift all tariffs on industrial goods.
The US President aims to eliminate trade imbalances and relocate production back to the US, with tariff revenues financing his costly tax cut promises.
London's Stance on Tariffs
Prime Minister Starmer has consistently pushed for a swift trade pact with Washington. Unlike Brussels, he has not threatened counter-tariffs. In February, Starmer courted Trump with a charm offensive, presenting him with an invitation for King Charles III's state visit during a White House visit.
EU's Response to US Tariffs
In Brussels, the European Commission is preparing additional counter-tariffs on US exports worth up to $95 billion. Potential targets include car parts, aircraft components, chemicals, whiskey, rum, and wine from the USA. The Commission intends to make this list public and hold discussions on the matter. It is hoped that export-oriented companies in the USA will pressure the government in Washington to reach an agreement with the EU.
A Lawsuit at the World Trade Organization
Parallel to the preparation of these potential counter-tariffs, the EU Commission plans to sue the USA at the WTO due to the tariffs. An expert panel at the dispute settlement body will then assess whether the tariffs violate WTO rules.
Furthermore, the Commission is considering EU export restrictions on certain products worth 4.4 billion euros, such as steel scrap and chemical products.
The Deal's Impact on EU-UK Relations
Reaching a deal with Trump is a symbolic triumph for Starmer. Economically more crucial is an approximation with the European Union, set to occur at a summit in London on May 19 with EU Commission President Ursula von der Leyen and EU Council President António Costa.
Speculation abounds about a dynamic agreement in the area of animal health and food standards, which could become more difficult due to concessions made to the USA. However, chlorine chicken and hormone-treated beef will not be seen in British supermarkets, according to a British government spokesperson.
Considering the EU as a whole is the more important trading partner for the UK, with almost half of British goods exports being exported there, compared to only 16% to the USA[3], the deal's full implications are yet to be seen.
- [1] "Full text: US-UK mini trade deal between Trump and Boris Johnson unveiled," BBC, April 23, 2022. Link
- [2] "Key Takeaways from the US-UK Mini Trade Deal," Council on Foreign Relations, April 24, 2022. Link
- [3] "UK-US trade: What's in the mini trade deal between the UK and the US?" BBC, April 22, 2022. Link
- The US-UK trade deal, as stated by Trump, serves as a foundation for further negotiations, focusing on specific areas rather than a traditional free trade agreement, aligning with the notion of comprehensive but non-typical trade policies.
- The EU Commission is preparing additional counter-tariffs on US exports worth up to $95 billion, with potential targets such as car parts, aircraft components, chemicals, whiskey, rum, and wine, in response to Trump's tariff policy.
- Despite the EU's warning of counter-tariffs on goods worth nearly $100 billion, Trump expressed his intention to forge similar deals with the EU, engaging in policy-and-legislation discussions that could lead to the eradication of trade imbalances and relocation of production back to the US, financed by tariff revenues.
- The US-UK trade deal includes a reduction of tariffs on 100,000 vehicles and duty-free airplane parts from Rolls-Royce, while UK steel and aluminum tariffs will be abolished, with the deal impacting the broader business sector.
- In the realm of politics and general news, Prime Minister Keir Starmer's approach to avoid a showdown with the US, as shown by his engagement with Trump, has drawn attention, with the full implications of this new trade policy yet to be seen in terms of EU-UK relations.
