The Kingdom of the United States and the United recently unveiled a groundbreaking trade deal. It implements a new 10% tariff on UK car exports to the US. This critical step comes on the heels of the US tripling of tariffs on UK-made vehicles. The new tariff rate has increased significantly as well, from 3.4% to 10%. The deal aims to relieve the cost burden on the UK automotive sector. This industry had been under tremendous threat from increasing tariffs.
Under these new terms, the UK has reduced its tariffs on US imports by 66%. For RECs, they have been on a steady decline from 5.1% to 1.8%! The removal of this redundancy is projected to save UK car exporters more than £1 billion. As it stands, the UK car export quota to the US is limited to 100,000 vehicles. This hard cap limits the positive impacts on exporters.
Andrew Bailey, the Governor of the Bank of England, said he was “cautiously optimistic” about the deal. He thinks it would be an important step toward easing current global trade tensions. The deal will not have a significant effect on total trade volume. For heavily impacted sectors such as automotive and agriculture, it’s especially important.
That’s why the deal takes direct aim at car tariffs. Most importantly, it now allows the UK government to negotiate a more ambitious agreement with the EU on maintaining shared food standards (or aligning on standards). The UK has repeatedly and resolutely pledged to maintain high food standards. It has already refused to accept imports of beef treated with growth hormones or chlorinated chicken. This stance positions the UK favorably for a potential “full fat” food and farm export deal with the EU, which could materialize within the next fortnight.
Currently, the UK imports more from the US than it exports in return. It will maintain a 10% reciprocal tariff on US automobiles. The deal is a smart balancing act as the UK continues figuring out its new post-Brexit trade waters. The EU is still the UK’s biggest trading partner. That’s what makes any future deals with EU countries especially significant.
These recent tariff changes are the clearest indication of a changing dynamic in international trade relations. They underscore the confusion caused in part by Brexit negotiations. The UK is currently focused on developing its own comprehensive trade policies independent of that made by the EU. This agreement with the US serves as a launching pad and practice run for its new trading prowess.