U.S. President Donald Trump and United Kingdom Prime Minister Keir Starmer have unveiled what Trump describes as a “full and comprehensive” trade deal between their nations.
However, a closer examination indicates that the arrangement is more limited and selective, presenting itself as a mere initial step in ongoing negotiations rather than a finalized agreement.
Numerous details remain ambiguous, and many pertinent issues are yet to be addressed.
In the wake of Trump’s sweeping tariffs imposed on global trade partners this spring, speculation surged over which countries might negotiate new deals to evade these tariffs.
It is understandable that the United Kingdom has emerged as a priority partner, given its status as America’s largest commercial ally when considering trade in services alongside goods and mutual investment flows.
The significance of the U.S.-U.K. relationship is underscored by the fact that 2.5 million British and American workers rely on robust commercial ties.
The trade deal outlines certain agreed-upon measures while leaving other areas untouched.
Notably, the agreement includes a reduction of Trump’s 27.5% auto tariff to 10% for a quota of 100,000 U.K. cars imported into the United States, aligning closely with the U.K.’s car exports to the U.S. in 2024.
While Starmer celebrated this as an achievement, it is essential to note that prior to Trump’s presidency, the auto tariff stood at a mere 2.5%.
The U.K. is poised to lower tariffs on U.S. cars, but specifics remain unclear.
Moreover, the agreement entails a commitment from the U.K. to purchase $10 billion worth of U.S. airplanes, in return for which Rolls-Royce engines will be imported duty-free into the U.S.
Additionally, the U.S. has agreed to eliminate its 25% tariff on U.K. steel and aluminum exports.
On the flip side, London has decided to abolish its 19% tariff on up to 1.4 billion liters of U.S. ethanol, America’s leading agricultural export to the U.K.
Nonetheless, any volumes exceeding this will encounter U.K. tariffs ranging from 10% to 50%.
Despite these developments, there are notable omissions in the trade agreement.
For instance, the U.K. has not rescinded its 2% digital services tax affecting U.S. tech companies.
While both parties express intent to negotiate a digital trade agreement, such discussions are likely to require extensive time, and concrete details remain elusive.
Perhaps most critically, Washington has declined to lower its 10% baseline tariff on all U.K. products, a factor expected to hinder U.K. exports valued at $68 billion last year.
Consequently, the detrimental impact on U.K. exports may overshadow any potential benefits stemming from the newly announced arrangements.
Starmer’s efforts may have mitigated some losses, but the current outcome still results in a net disadvantage for the U.K.
The announcement has generated a plethora of questions.
In the contentious agriculture sector, both nations have agreed to permit the export of 13,000 metric tons of beef to each other.
However, U.K. exporters will continue to face U.S. tariffs between 4% and 10%, while the U.S. will grant duty-free access for its beef exports under the quota.
Currently, the U.K. prohibits the importation of U.S. beef derived from cattle treated with artificial growth hormones, with Starmer affirming that Britain will uphold its food quality standards.
This stipulation indicates that only hormone-free U.S. beef will comply with U.K. regulations.
U.S. Agriculture Secretary Brooke Rollins is engaged in discussions in the U.K. this week, focusing on refining the details regarding beef and other agricultural products, suggesting further negotiations are imminent.
Moreover, uncertainties loom over the pharmaceutical trade, a critical sector for both economies.
The U.S. Department of Commerce has commenced a Section 232 investigation concerning the national security implications of pharmaceutical imports, potentially leading to punitive tariffs against this vital U.K. export sector.
Although Starmer claims that the U.K. will receive preferential treatment regarding any future tariffs emerging from Section 232 assessments, there is no guarantee that Trump will acquiesce.
Pharmaceuticals stand as the U.K.’s second-largest export to the United States, valued at approximately $9 billion in 2024, creating a sense of urgency surrounding continued dialogue.
Further complications arise in the steel and aluminum sectors, where Washington’s decision to exempt the U.K. from its 25% tariffs relies on the successful negotiation of a new “alternative arrangement” leading to what they term “a new union for steel and aluminum.”
However, this arrangement’s foundation had been laid in previous discussions, only to be abandoned by Trump.
As details continue to emerge, skepticism prevails.
Remarkably, the agreement fails to address services trade, despite the fact that annual services trade between the U.S. and U.K. surpasses $180 billion, dwarfing goods trade.
The majority of both American and British employment resides within the services sector, highlighting its potential if barriers to trade are lowered.
Engaging in services could yield far greater advantages for workers, producers, and consumers than the more modest arrangements concerning goods.
With Trump’s trade strategy in the backdrop, this deal raises pertinent questions regarding the implications for the future international trade framework.
Under existing World Trade Organization (WTO) regulations, every time a country reduces tariffs for one trade partner, it is obliged to extend the same benefits to all trading entities, barring agreements that encompass substantial trade elements.
This “most favored nation” (MFN) principle forms the backbone of global commerce.
The Trump administration’s recent approach challenges this principle by calculating disparate tariff rates based on an internal review of trade and non-trade barriers.
Should the U.K. concede preferential tariff reductions to the U.S. without reciprocation to other trading partners, it exposes itself to international legal challenges and retaliatory actions.
Consequently, such a scenario could destabilize global trade arrangements while reinforcing Trump’s disruptive agenda.
While the current U.S.-U.K. deal may appear distinct from broader trade initiatives, it reflects an approach that could guide other countries proffering similar accommodations with the United States.
It suggests that upcoming bilateral deals may consist of limited sector-specific agreements instead of all-encompassing trade pacts.
These agreements could manifest as mere down payments on extended negotiations—as exemplified by the recently announced U.S.-China “deal.”
Ultimately, the U.K.’s relative success in navigating the challenges posed by U.S. trade measures hints at a potential negotiation strategy for other countries.
This approach, akin to a boxing tactic known as rope-a-dope, entails evading substantial blows while maintaining an opportunity to counterattack.
Though this strategy may not suit every country, it holds potential for some negotiating parties in upcoming discussions.
image source from：https://www.brookings.edu/articles/what-does-the-us-uk-deal-mean-for-trumps-trade-agenda/
