A Revolutionary Trade Pact: Trump's UK Deal Amid High Tariffs
- Glimpse: A 4-minute read
UK and U.S. seal significant trade accord, as declared by Trump. - Britain and Trump ink groundbreaking trade accord
In a flashy White House press conference, US President Donald Trump heralded a groundbreaking trade pact with the UK, declaring it a testament to his tariff strategy. "It's a big fu*king deal," Trump boldly stated, unfazed by the EU's impending threats of counter-tariffs.
Despite the EU's looming threat of imposing tariffs worth nearly $100 billion on US exports, Trump expressed his eagerness to strike a deal with the EU as well. This deal with the UK marks the first major agreement with a significant trading partner since Trump implemented his sweeping tariff increases in early April. Hinting at more deals to come, Trump oilily stated, "Many more deals, folks, many more."
"A Truly Fantastic, Historic Day"
UK Prime Minister Keir Starmer, who has been diligently avoiding a confrontation with the US, may find vindication in his approach. "This is a truly fantastic, historic day," Starmer proclaimed over the phone during the press conference.
While Trump described the agreement as "comprehensive," reports from UK government circles suggest it's not your typical free trade agreement. This deal primarily concentrates on specific sectors and serves as a foundation for further negotiations.
Carve Outs for UK Auto Imports
Currently, UK exports, like those of many other nations, face US tariffs of 10% on most goods, with rates as high as 25% on steel, aluminum, cars, and car parts. However, this is about to change with the introduction of a quota of 100,000 vehicles, slashed to a mere 10% tariff, according to US Trade Minister Howard Lutnick. Additionally, aircraft parts from Rolls-Royce will be allowed to enter the US duty-free. In exchange, the UK will import Boeing aircraft worth $10 billion (around €8.9 billion). Tariffs on UK steel and aluminum will also be eliminated.
It's worth noting that in 2023, the US-UK trade volume was around €370 billion, with approximately 70% of UK exports to the US consisting of services, which remain unaffected by tariffs, and only about 30% made up of goods.
EU's 90-Day Deadline Approaches
Trump threatened the EU with blanket tariffs of 25% if no agreement is reached, with the current deadline set for July. To date, the Trump administration has not engaged with a EU offer to mutually lift all tariffs on industrial goods.
Trump intends to rectify alleged trade imbalances and shift production back to the US. Revenues from tariffs are also meant to finance his ambitious tax cut promises.
London's Strategic Approach to Tariffs
Prime Minister Starmer has been persistently focusing on swiftly finalizing a trade pact with Washington. Unlike Brussels, Starmer has not threatened counter-tariffs. Starmer courteously wooed Trump during a visit to the White House in February, presenting the US President with an invitation for King Charles III's state visit.
EU's Reaction to US Tariffs
The response in Brussels has been different. The European Commission is allegedly preparing additional counter-tariffs on US exports worth up to $95 billion. These extra duties may be imposed on industrial and agricultural products such as cars, sweet potatoes, and whiskey if negotiations with Washington fail to yield a resolution.
Sources suggest that the Commission is also contemplating EU export restrictions on certain products valued at 4.4 billion euros, which include steel scrap and chemical products that have been popular imports for US companies.
Legal Battle Looms at the World Trade Organization
Parallel to the preparation of potential counter-tariffs, the EU Commission plans to sue the USA at the WTO regarding the tariffs. The dispute settlement body will then set up an expert panel to assess if the tariffs violate WTO rules.
Does the deal hinder an alignment between London and Brussels?
Striking a deal with Trump may be symbolically significant for Starmer. Economically more crucial is an alignment with the European Union, which is set to make significant strides at a summit in London on May 19 with EU Commission President Ursula von der Leyen and EU Council President António Costa.
There have been speculations about a dynamic agreement in the area of animal health and food standards. However, the UK government has stressed that British food standards will not be lowered by the agreement with the USA.
It's important to note that, economically, the EU is a far more significant trading partner for Britain, with almost half of British goods exports headed there. In contrast, "only" 16% of exports go to the USA, according to Marc Lehnfeld of the state-owned Germany Trade and Invest (GTAI).
- The US President's tariff strategy, as showcased in the recently announced UK trade pact, could potentially influence the employment policies within various sectors, especially those related to automotive and aviation, due to reduced tariffs and increased trade volume.
- Amid the ongoing trade tensions, the community policy and legislation, particularly those concerning finance and business, are likely to play a crucial role in determining the impacts of high tariffs on employment policies and economic stability.
- As negotiations continue with the EU over tariff agreements, politics will undoubtedly have a significant influence on employment policies, considering the potential for counter-tariffs and their effects on the job market in various industries and sectors.
