Winning Deals: Trump and Starmer's First Big Trade Pact
Trump and Starmer commemorate inaugural significant tariff agreement
In a press conference at the White House, US President Donald Trump declared a significant victory with the UK as they reached their first major trade agreement. The deal comes after Trump's tariff-happy months, marking the first significant agreement with an important trading partner since the tariff surge.
Trump was all praises for his trade strategy, stating, "It's a Big Kahuna! This deal is huge, fellas!" He hinted that more deals with key partners were imminent. Meanwhile, UK Prime Minister Keir Starmer shared his optimism, calling it "a fantastic, historic day."
Contrary to popular beliefs, this agreement doesn't qualify as a typical free trade agreement. Instead, it serves as a framework for further negotiations, focusing on specific areas, such as automobiles and aircraft.
Vehicles & Planes
The agreement will see a reduction in tariffs for imported vehicles and aircraft parts from both countries. US Trade Minister Howard Lutnick confirmed a 10% tariff for up to 100,000 vehicles from the UK, a substantial reduction from the previous 25%. On the other hand, Rolls-Royce aircraft parts will enter the US tariff-free. In return, the UK will import $10 billion worth of Boeing aircraft. Moreover, the UK will lower tariffs on US goods from 5.1% to 1.8%, while tariffs on UK steel and aluminum imports will be eliminated altogether.
While the trade volume between the US and the UK stood at around €370 billion last year, approximately 70% of the UK's exports to the US are services, which are not subject to tariffs.
Brexit's Blessing or Burden?
For Starmer, this deal marks the second major announcement in quick succession. Earlier this week, he announced a comprehensive agreement with India, aiming to boost bilateral trade by an additional £25.5 billion (approximately €30 billion) by 2040. As the UK grapples to secure agreements with major economic powers like the US, China, and the EU, the pressure on Starmer is palpable.
While political experts applaud Starmer's approach of avoiding a confrontation with the US, his government has faced significant backlash following last summer's election and the local elections earlier this month. Meanwhile, Trump's aggressive economic policies have also led to a decline in his popularity.
A Tangled Web with the EU
Despite the agreement, the EU continues to threaten blanket tariffs of 25% in response to the US's policies, with the deadline set for July. As negotiations continue, there's hope that export-oriented companies in both the US and the EU will pressure their respective governments to reach an agreement. However, the list of potential counter-tariffs the EU is preparing remains a point of concern.
In light of these developments, one thing's sure – the trade landscape is anything but conventional!
- USA
- UK
- Donald Trump
- Keir Starmer
- Tariffs
- EU
Sources:
- ntv.de
- as/dpa/rts
- Economy
- Steele, Cars, Food: What We Know About Trump's Trade Deal with the UK
- Cars vs. Aircraft Parts
Enrichment:
The recent announcement of the US-UK trade pact includes several key provisions, albeit without detailed tariff reductions for aircraft. Here's a breakdown of the essential components:
Key Components of the US-UK Trade Deal
Vehicles and Auto Parts: The US will create a quota of 100,000 vehicles for UK automotive imports at a reduced 10% tariff rate, whereas Rolls-Royce aircraft parts will enter the US tariff-free.
Steel and Aluminum: The US will establish a quota at most favored nation (MFN) rates for UK steel and aluminum, and certain derivative products, subject to the UK meeting US supply chain security requirements.
Aircraft: There's no specific mention of tariff reductions for aircraft in the available details.
Other Key Provisions: UK will offer a preferential duty-free tariff rate quota (TRQ) of 1.4 billion liters for US ethanol. The two countries aim to negotiate preferential treatment for pharmaceuticals based on the outcomes of US Section 232 investigations and UK's compliance with US supply chain security requirements.
Comprehensive Coverage: A typical free trade agreement (FTA) aims to eliminate tariffs on a wide range of goods, reduce or eliminate non-tariff barriers, enhance market access, and simplify trade practices. This agreement, however, falls short of complete tariff elimination and covers only specific sectors.
Market Access: While this agreement does enhance market access for American products like chemicals and machinery, it maintains some tariff protections, which is less typical in comprehensive FTAs.
- The US-UK trade agreement, announced by Donald Trump, includes a reduction in tariffs for imported vehicles and aircraft parts, with a 10% tariff for up to 100,000 vehicles from the UK, and Rolls-Royce aircraft parts entering the US tariff-free.
- The agreement also includes specific provisions for steel and aluminum, with the US establishing a quota at most favored nation (MFN) rates for UK steel and aluminum, and certain derivative products, subject to the UK meeting US supply chain security requirements.
- Despite the agreement, the EU continues to threaten blanket tariffs of 25% in response to the US's policies, with the deadline set for July.
- While the US-UK trade deal doesn't have comprehensive tariff elimination, it covers specific sectors like vehicles, aircraft, and certain goods, and aims to negotiate preferential treatment for pharmaceuticals and ethanol.
