The UK has received an exemption from the proposed increase in U.S. tariffs on steel imports. Originally scheduled to increase from 25% to 50%, these tariffs will no longer affect the UK. President Donald Trump had previously closed this particular exemption via executive order. It was a wonderful moment of relief for beleaguered UK trade officials. This relief hasn’t come without challenges of its own. On May 8, the UK government managed to negotiate a tariff cut to zero, so that none of these articles were subject to tariffs.
The UK government stayed on the back foot on its position until the exemption was finally confirmed. This announcement was received with relief by trade officials who had been expecting the damage of the heightened tariffs. This exemption isn’t without its caveats. The UK will have to lower its tariffs on certain U.S. beef cuts and on U.S. ethanol, a renewable fuel produced from crops.
Importantly, this decision to reduce tariffs on U.S. beef products and ethanol has provoked significant concern. This is particularly evident in the UK ethanol market, where wheat producers are key constituents. This critical market is now reeling from the effects of the tariff cuts, creating confusion and risk for local producers. In addition, the risk that international steel destined for the U.S. will be redirected into the UK market creates even more headaches. Such an influx of steel would certainly result in a surplus situation here in the UK. This oversupply threatens to further squeeze increasingly uncompetitive domestic steelmakers.
The UK faces a pressing deadline: should a final deal not be reached by July 9, the tariff rate on steel imports would automatically rise to 50%. This new, rather aggressive deadline increases the stakes for both U.K. and U.S. businesses. From manufacturers to railroads to transportation unions, many are speaking out against the uncertainty that this needless exemption creates.
As a result, the exemption has an immediate effect on bilateral trade between the two countries. It shapes their overall bilateral economic relationship even more profoundly. This story illustrates the convoluted reality of international trade negotiation. Both governments will need to engage in a careful balancing act to safeguard their emerging industries and maintain healthy bilateral trade ties.