United States and UK Seal "Significant" Trade Pact Amidst High Tariffs
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Trade Deal Strike: Trump Unveils Groundbreaking Accord with the U.K. - Britain and Trump sign groundbreaking trade accord
In a celebratory White House press conference, President Donald Trump announced a historic trade deal with the UK, hailing it as the culmination of his tariff policies. "It's a big f**kin' deal," Trump declared, emphasizing the agreement's significance.
Trump expressed optimism about negotiating with the EU, despite threats of retaliatory tariffs on US exports worth approximately $100 billion. The UK deal marks the first significant trade agreement since the US imposed sweeping tariff hikes in early April, and Trump hinted that more such deals were on the horizon.
A "Fantastic," "Historic" Milestone
UK Prime Minister Keir Starmer might feel validated in his strategy to avoid confrontation with the US. "This is a truly fantastic, historic day," Starmer said during a phone call at the press conference.
Although Trump described the agreement as comprehensive, sources from the British government stated that it was not a traditional free trade agreement. Instead, it focuses on specific areas and serves as a foundation for further negotiations.
Tariff Adjustments and Quotas
Previously, the UK suffered US tariffs of 10% on most exports, with tariffs on steel, aluminum, cars, and car parts reaching 25%. Now, a quota of 100,000 vehicles will be subject to a 10% tariff [2], according to US Trade Minister Howard Lutnick. Aircraft parts from Rolls-Royce will enter the US duty-free. In exchange, the UK will import $10 billion worth of Boeing aircraft [2]. Tariffs on British steel and aluminum will be completely eliminated.
The US-UK trade volume was around $370 billion in 2020, with about 70% consisting of services, which are not influenced by tariffs. Only around 30% is goods [1].
EU's July Deadline and Possible Counter-Tariffs
Trump has threatened the EU with across-the-board tariffs of 25% if no agreement is reached by July. To date, the Trump administration has not replied to Brussels' offer to jointly remove tariffs on industrial goods [1]. The EU may impose additional tariffs on US exports worth up to $95 billion [4]. These tariffs could target industrial and agricultural products such as cars, sweet potatoes, and whiskey, should negotiations with Washington fail to produce a resolution.
Machine parts, automotive and aircraft components, chemicals, whiskey, rum, and wine from the US may also face additional tariffs [4]. The European Commission is reportedly planning to publish and discuss the extensive list of potential tariffed products [4]. The hope is that US export-oriented companies will pressure the government in Washington to negotiate with the EU.
Complaint at the WTO and Potential Export Restrictions
In parallel to the preparation of possible counter-tariffs, the EU Commission intends to sue the US for tariffs at the WTO [4]. The dispute settlement body will appoint an expert committee to determine whether the tariffs violate WTO rules. Additionally, the EU Commission plans to consider EU export restrictions on certain products worth 4.4 billion euros, including steel scrap and chemical products that are currently imported by US companies [4].
Will the Agreement Impact Relations Between London and Brussels?
Reaching a deal with Trump is a symbolic victory for Starmer. Progress in economic alignment with the European Union, which is expected to make significant strides at a May 19 summit in London with EU Commission President Ursula von der Leyen and EU Council President António Costa, is considered more important [1].
There has been speculation that a dynamic agreement in the area of animal health and food standards could be hindered by concessions to the US [1]. However, British food standards will remain unaltered due to the agreement with the US, according to a British government spokesperson.
The EU remains Britain's more significant trading partner, with nearly half of British goods exports going there [5]. In contrast, "only" 16% of exports go to the US [5].
Hint: This article has been updated.
- Keywords:
- Donald Trump
- Keir Starmer
- USA
- Great Britain
- Trade Agreement
Additional Insights:
- The Economic Prosperity Deal (EPD) and the trade framework announced by the Trump administration form the basis of the agreement between the US and UK.
- Key areas of the trade agreement focus on tariffs and trade barriers, intellectual property and labor practices, environmental policies, market access and security, and future negotiations.
- The agreement may be terminated by either country with written notice, and both parties will discuss procedures for review and termination during further negotiations.
- The United States' tariff policies, implemented to incentivize favorable trade agreements, led to the announcement of a significant trade pact with the UK, met with optimism for future negotiations with the EU.
- Despite the historic nature of the US-UK trade deal, sources from the British government clarified that it was not a traditional free trade agreement but focused on specific areas.
- The US-UK trade agreement involves tariff adjustments and quotas, with a reduction in tariffs on British steel and aluminum and a quota of 100,000 vehicles subject to a 10% tariff.
- In response to the US-UK agreement, the EU may apply counter-tariffs on US exports worth up to $95 billion, targeting industrial and agricultural products such as cars, whiskey, and steel scrap, should negotiations fail to produce a resolution.
- In parallel to potential counter-tariffs, the EU Commission plans to sue the US for tariffs at the WTO and may consider EU export restrictions on certain products worth 4.4 billion euros, including steel scrap and chemical products, aiming to pressure the US government for negotiations with the EU.