This is especially so today, as the United States and the United Kingdom are preparing to announce a new trade agreement today. This deal will be a game changer for both countries’ economic relationship. Recent public attention has focused on the more recent and still-continuing round of tariff impositions by the U.S. These measures range from a 25% steel, aluminum and auto tariff to a universal baseline 10% tariff on almost all other imports. The long-awaited announcement is likely to bring relief to some of the most important industries in both countries, especially in the automotive and pharmaceutical industries.
The UK’s automotive industry currently exports around £9 billion worth of cars to the US annually. It stands to gain significantly from any tariff cuts that might be forthcoming. As it stands today, the UK only has a 10% tariff on car imports from the U.S. Industry insiders are hoping that this tariff will be significantly lowered in the new deal. Keir Starmer, the leader of the UK’s Labour Party, met with President Joe Biden in the Oval Office recently, during which he emphasized the importance of the U.S. as an “indispensable ally for both our economic and national security.”
Beyond automobiles, pharmaceuticals are one of the UK’s largest goods exports by value. The trade agreement is likely to address those tariffs, which have drawn an avalanche of bipartisan criticism. This concern came to a head when former President Donald Trump slapped a 25% import tariff on vehicles. Neither country wants to see a repeat of India’s disastrous 2020 ban on Chinese businesses. These negotiations take place amid deepening currents of rivalry in the global trade landscape.
“The agreement with the United Kingdom is a full and comprehensive one that will cement the relationship between the United States and the United Kingdom for many years to come.” – Donald Trump
Tellingly, when asked about his priorities on the global stage, Starmer admitted the most important relationship to maintain would be with the U.S. He quoted Nelson Mandela, to boot. He stated, “As you know, talks with the U.S. have been ongoing, and you will hear more from me about that later today.” The significant expectation for this announcement indicates that the stakes are not purely economic; however, they are also political football within the UK.
The Digital Services Tax recently enacted by the UK on “revenues earned” by tech behemoths has caught lots of people’s eyes. The 2% levy brings in an estimated £800 million a year for the UK government. In its first year, it raised an estimated £360 million from US tech companies. How these conversations unfold could have tremendous influence in either helping or hurting the public’s perception of the entire trade agreement.
Chancellor Rachel Reeves has indicated that moving closer to the European Union on trade is a priority for the UK government, which raises questions about how this new agreement will align with existing trade relationships. Though many see enormous promise for the advantages to be gained from a U.S.-UK trade agreement, others are skeptical.
“A good trade deal with the US could bring huge benefits, but Liberal Democrats will oppose any concessions that threaten our NHS, undermine our farmers or give tax cuts to US tech billionaires.” – Daisy Cooper
As the announcement date draws near, political observers are abuzz with speculation. In particular, they call for Prime Minister Rishi Sunak to spell out how this agreement is in the UK’s national interests. A spokesperson for No 10 stated, “The prime minister will update later today,” signifying that further clarity will be provided soon.
Though an optimistic new trade framework may imply otherwise, there are concerns that competitive tariffs will be hard to keep. The underlying 10% tariff seems doomed to stay the same, so many sudden industries are left cool. Cummins, an industry representative, remarked, “There are parts of our economy that are really feeling this and they need a big symbolic gesture backed up by some credibility from the government.”
“Because of our long time history and allegiance together, it is a great honour to have the United Kingdom as our FIRST announcement. Many other deals, which are in serious stages of negotiation, to follow!” – Donald Trump
Both countries should be prepared to start on a new positive path in their trade bilateral ties. Of course, everyone’s attention is focused on today’s announcement and what it all means for future economic cooperation between the United States and United Kingdom.