A Rumble in the Global Market: Trump's UK Trade Victory Sparks EU Retaliation
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United States President Trump Brokers Agreement with British Public – EU Contemplates Retaliatory Tariffs - UK-EU Relations Tense as Trump Approves Agreement with UK; EU Announces Retaliatory Tariffs
In the game of trade politics, Donald Trump just scored a significant point with his recent deal with the UK. "It's a massive victory for my trade policy," Trump declared at a White House press conference.
He also expressed his ambition to negotiate with the EU, despite the EU's warning of retaliatory tariffs on US exports worth nearly $100 billion.
This US-UK agreement marks the first major trade partnership secured since Trump's broad tariff impositions in early spring. Trump hinted at a series of similar deals in the pipeline.
"An incredible, historical moment"
UK Prime Minister Keir Starmer might find vindication in his strategy to dodge a confrontation with the US. "This is truly an incredible, historical moment," Starmer commented over the phone during the press conference.
Trump deemed the deal as "extensive." However, sources from the UK government revealed that it isn't a conventional free trade agreement. Instead, it covers specific sectors and serves as a base for further negotiations.
Car Quotas and Tariff Relief
Currently, most British exports to the US face tariffs of 10%, while those on steel, aluminum, cars, and car parts bear a hefty 25% tax.
Under the new arrangement, this will be reduced to a quota of 100,000 vehicles at 10%, according to US Trade Minister Howard Lutnick. Aircraft parts from Rolls-Royce will enter the US duty-free. In return, the UK will import Boeing aircraft worth $10 billion (around €8.9 billion). Tariffs on British steel and aluminum will be completely eliminated.
The total trade volume between the US and the UK was around €370 billion last year. However, about 70% of UK exports to the US were services, which are tariff-free, and only about 30% were physical goods.
Analyzing the Deal: Expert's Take
A legal expert initially assessed the trade pact as a successful negotiation for the UK. "They managed to reduce or avoid the new Trump tariffs without crossing the line, such as compromising food safety standards," said Holger Hestermeyer, who teaches International and EU Law at the Vienna Diplomatic Academy.
Even Trump's demand for the abolishment of the tax on digital services has been put on hold, according to Hestermeyer.
The EU Deadline: A Ticking Clock
Trump had threatened the EU with blanket tariffs of 25% if no agreement was reached. The deadline for this threat is July. So far, the Trump administration has not responded to a Brussels offer for the mutual elimination of all tariffs on industrial products.
Trump aims to correct alleged trade imbalances and push production to the US through tariffs. Simultaneously, tariff revenues are intended to help fund his tax cut promise, at least in part.
How has London reacted to the tariffs?
Starmer met Trump with a full-scaled charm offensive. During a visit to the White House in February, he offered the US President an invitation for a state visit by King Charles III.
The EU's response to the US tariffs was quite different. According to a statement, the European Commission is preparing additional tariffs on US exports worth up to $110 billion. These duties could be imposed on industrial and agricultural products like cars, sweet potatoes, and whiskey, if negotiations with Washington do not progress.
Products like parts, chemicals, spirits such as rum and wine from the US could also be subject to additional tariffs. The Commission's list of products, over 200 pages long, will now be made public and discussed with the business community.
At the same time, there is hope that this list will also be scrutinized in the US, and export-oriented companies will pressure the Washington government to reach an agreement with the EU.
Parallel to the preparation of potential new tariffs, the EU Commission intends to sue the US at the WTO due to the tariffs, as the authority further announced. There, a dispute settlement panel will be set up to examine whether the tariffs violate WTO rules.
In addition, the Commission is considering EU export restrictions on certain products worth $5.3 billion in this case. These include, for example, steel scrap and chemical products that US companies currently import gladly.
Will the deal hinder a rapprochement between London and Brussels?
The agreement with Trump is a symbolic triumph for Starmer primarily. Economically more important is an approximation with the European Union, which should make significant progress at a summit in London on May 19 with EU Commission President Ursula von der Leyen and EU Council President António Costa. There has also been speculation about a dynamic agreement in the area of animal health and food standards, which could be impacted by concessions to the US. However, there will be no chlorine chicken and hormone-treated beef in British supermarkets. British food standards will not be lowered by the agreement with the US, a British government spokesman emphasized.
The backdrop could be that the EU as a whole is a more significant 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.
Enrichment Insights:
- Background: The EU-US relationship has been strained due to ongoing disputes over trade tariffs and trade imbalances. These tensions petrified in 2018 when the US imposed tariffs on EU steel and aluminum imports, citing national security concerns. The EU retaliated with tariffs on various American goods, such as motorcycles, whiskey, and orange juice. 1
- "Tariff Debates": The EU has threatened to impose retaliatory tariffs on US exports worth nearly €95 billion, in response to the US imposing tariffs on EU products. The proposed tariffs would target various industrial and agricultural products, such as cars, sweet potatoes, and whiskey. 2
- "The End of the Line"?: The ongoing trade disputes between the US and EU have led some experts to question the future of the long-standing Transatlantic Trade and Investment Partnership (TTIP), a proposed free-trade agreement between the two regions. 2
- "Tariff Elimination": The EU has proposed moving towards reciprocal, tariff-free trade with the US. However, this proposal has been met with skepticism, as concerns remain regarding the extent of tariff elimination and potential concessions that would need to be made. 4
- Donald Trump's recent deal with the UK has been hailed as a victory for his trade policy, despite the EU's threat of retaliatory tariffs on US exports worth $100 billion.
- The US-UK agreement covers specific sectors and serves as a base for further negotiations, with car quotas, tariff relief, and duty-free aircraft parts among the concessions.
- Trump has hinted at a series of similar deals in the pipeline, but the EU's response to US tariffs has been different, with the European Commission preparing additional tariffs on US exports worth up to $110 billion.
- Starmer met Trump with a full-scaled charm offensive, offering the US President an invitation for a state visit by King Charles III, while the EU Commission is also considering EU export restrictions on certain products.
- Expert analysis suggests that the trade pact is a successful negotiation for the UK, as they managed to reduce or avoid the new Trump tariffs without compromising food safety standards.
- The EU awaits developments on the possible elimination of all tariffs on industrial products in negotiations with Washington, but parallel to the preparation of potential new tariffs, the EU Commission intends to sue the US at the WTO due to the tariffs.
- The ongoing trade disputes between the US and EU have led some experts to question the future of the long-standing Transatlantic Trade and Investment Partnership (TTIP), a proposed free-trade agreement between the two regions.
- The backdrop could be that the EU as a whole is a more significant trading partner for Britain, with nearly half of British goods exports going to the EU, compared to only 16% to the US.
