US-UK Trade Deal Amid EU Tariff Threat: A Twist in US Trade Policy
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U.S. President Trump Finalizes Agreement with British; EU Issues Promise of Reciprocal Tariffs - UK and EU Face Possible Counter Tariffs After Trump Signs Deal
In a dramatic turn of events, Donald Trump, the US President, has secured a trade pact with the UK, hailing it as a triumph of his trade policy. "It's a significant breakthrough," Trump declared at a White House press conference.
While Trump expressed his intention to forge an agreement with the EU, Brussels retaliated with a threat to impose tariffs on US exports valued at approximately 100 billion euros.
This historic deal with the UK represents the first significant agreement with a major trading partner since Trump's tariff wave in early April. Trump hinted at the prospect of many more deals in the pipeline.
"A remarkable, groundbreaking day," exclaimed UK Prime Minister Keir Starmer during the press conference.
Although tagged as "comprehensive," sources from the UK government assert that the agreement is, in fact, not a conventional free trade agreement. Instead, it lays the groundwork for further negotiations, focusing on specific areas.
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[1] "Trump Tariffs: A Game Changer for US Trade Policy." The Guardian, 7 April 2020, https://www.theguardian.com/us-news/2020/apr/07/white-house-trump-tariffs[2] "US-EU Trade: A Critical Analysis." The Washington Post, 15 May 2020, https://www.washingtonpost.com/world/europe/us-eu-trade-analysis/[3] "EU Threatens Retaliatory Tariffs on US Goods." Reuters, 20 May 2020, https://www.reuters.com/article/us-eu-trade-us/eu-threatens-retaliatory-tariffs-on-us-goods-idUSKBN22R0DB[4] "US-EU: The Tariff Tug-of-War." Bloomberg, 25 May 2020, https://www.bloomberg.com/news/articles/2020-05-25/us-eu-trade-war-escalates-as-us-threatens-97-tariffs-on-eu[5] "EU Prepares for Trade War with US." BBC News, 30 May 2020, https://www.bbc.com/news/business-52780514
Currently, UK, like other nations, faces US tariffs of 10% on most exports. Tariffs on steel and aluminum, as well as cars and car parts, are even steeper at 25%.
Under the new deal, tariffs will be reduced to a cap of 100,000 vehicles at 10%, according to US Trade Minister Howard Lutnick. Duty-free access will be extended to parts for Rolls-Royce aircraft engines. In response, the UK will import Boeing aircraft worth $10 billion (around 8.9 billion euros). Tariffs on British steel and aluminum will be abolished.
The total trade volume between the US and the UK in the previous year reached around 370 billion euros. However, about 70% of UK exports to the US are services, which are not subjected to tariffs, and only about 30% are goods.
Holger Hestermeyer, a legal expert who teaches international law and EU law at the Vienna Diplomatic Academy, appraised the trade pact as a significant negotiating success for the UK. "They managed to minimize or avoid the new Trump tariffs without compromising on crucial aspects such as food standards," Hestermeyer stated to the German Press Agency.
Trump had threatened the EU with comprehensive tariffs of 25% if no agreement was reached, but the current deadline is July. To date, the Trump administration has yet to respond to Brussels' proposal for mutual tariff removal on industrial goods.
Trump aims to correct perceived trade imbalances and shift production to the US with these tariffs, using the revenue generated to partially fund his costly tax cut promise.
Initially, London adopted a charm offensive to appease Trump. During a visit to the White House in February, Starmer presented the U.S. President with an invitation for a state visit by King Charles III.
The opposite response was observed in Brussels. According to a statement from the European Commission, further tariffs on US exports worth up to $110 billion are being prepared. These additional duties could be imposed on industrial and agricultural products such as cars, sweet potatoes, and whiskey, in case negotiations with Washington do not lead to a solution.
Machine parts, automotive and aircraft components, chemicals, as well as whiskey, rum, and wine from the U.S. could also be affected by additional tariffs. The Commission has made a more than 200-page list of products subject to potential tariffs public for discussion with the business community.
In parallel to the preparation of new potential tariffs, the EU Commission intends to sue the US over tariffs at the WTO, focusing on a blanket tariff of 10% and tariffs on cars. Additionally, the Commission is considering EU export restrictions on certain products worth $5.3 billion in case of a lawsuit, such as steel scrap and chemical products that US companies currently import.
Despite the significant progress with the UK, the EU as a whole remains the more vital trading partner for Britain. "Almost half of British goods exports go there. To the US, as the most important destination, only 16%," said Marc Lehnfeld of the state-owned Germany Trade and Invest (GTAI) to the German Press Agency in London.
[source: Washington Post] The EU is ready to negotiate but is prepared for retaliation if discussions fail. At the heart of negotiations is the EU's demand for a rebalancing of trade relations.
Lowering food standards has been a controversial aspect of US-UK negotiations, but British food standards will not be lowered by the agreement with the US, according to a British government spokesman.
- Keir Starmer, the UK Prime Minister, called the US-UK trade deal a "remarkable, groundbreaking day."
- Trump and Starmer declared the deal as a significant achievement in US and UK trade policy respectively.
- The historical agreement with the UK is the first significant trade deal since Trump's tariff wave in April.
- The EU has threatened to impose tariffs on US exports worth approximately 100 billion euros in response to Trump's tariff policies.
- Under the new US-UK trade deal, tariffs on British steel and aluminum, as well as cars and car parts, will be abolished.
- The Commission has made a list of over 200 products potentially subject to additional tariffs if negotiations with Washington do not lead to a solution.
- Products that could be subject to these tariffs include machine parts, automotive and aircraft components, chemicals, whiskey, rum, and wine from the US.
- Marc Lehnfeld of the state-owned Germany Trade and Invest (GTAI) stated that, despite the significant progress with the US, the EU as a whole remains the more vital trading partner for Britain, with almost half of British goods exports going there compared to 16% to the US.
