The United Kingdom and the United States are expected to finalize a key deal soon. This unprecedented trilateral agreement is expected to eliminate over 99% of tariffs between the two countries. US President Donald Trump used social media platform Twitter to congratulate himself on the agreement. He called it “the largest trade deal in the world.” According to reporting, the deal will fall short of delivering the necessary building blocks towards a much broader deal.
To further our special relationship, the US has asked that the UK cut its import tariff on US cars to 2.5%. In response, UK Chancellor of the Exchequer, Rachel Reeves has signaled her openness to explore a similar cut. The UK currently imposes a 10% tariff on imports of US-made cars. Negotiations are still ongoing, and many experts predict this tariff be lowered considerably.
Instead, a quota system is being debated. Under such a system, the UK could be allowed to export a certain number of cars to the US at low or zero tariffs. This new system is intended to facilitate legitimate trade between the two countries while preventing and protecting against bad actors from all sectors.
This nascent deal would not address every wrinkle in the current trade landscape. The US today imposes a 25% tariff on all steel and aluminium imports, a policy that took effect in March. The UK currently exports just under £700 million of steel and aluminium to the US. Industry leaders have been sounding the alarm that if this tariff isn’t reduced or canceled it will be devastating to their industry.
The negotiations are dealing with agricultural products. They’re still slaughtering livestock while ignoring most animal welfare standards. As far as US tariff reduction on potentially beef raised on US cattle fed growth hormones is concerned, the UK has banned the use of growth hormones in beef production since the 1980s. This decision reflects the country’s firm dedication to maintaining the highest standards of food safety. In reality, the UK continues to insist on very high standards for food coming into the country. They ban chlorinated chicken and hormone-treated beef, which makes current negotiations messy.
Chancellor Reeves has made his priorities crystal clear. He noted that food standards will not be part of this deal due to domestic political sensitivities. This decision sheds light on the difficulties faced at balancing trade policies with upholding commitment to our national standards.
In its initial year, the UK government collected close to £360 million from American tech companies. This revenue stemmed from the country’s newly-minted digital services tax. This new technology revenue underlines the growing role of technology and innovation in the ever-booming China-US trade conversation.
While both countries are now better positioned to complete this deal, it is still clear that many hurdles still exist. Reduced tariffs go a long way in smoothing out trade relations. Stakeholders must go beyond that and address the challenges posed by inconsistent standards and the economic impact on sectors, especially manufacturing.