The trade deal between the United States and the United Kingdom was announced as the event.
British goods entering the United States will be subject to a 10% tariff, as announced on Liberation Day on April 2. Before Trump’s arrival, the rate was 1%.
The automotive sector will be taxed at 10% on the first 100,000 vehicles entering the US, instead of the current 27.5%. 100,000 is the number of vehicles exported before to the US, virtually tax-free. Prices will be higher, which will reduce the number of vehicles exported.
Steel and aluminum will no longer be taxed, while it was taxed at 25% before.
British cars will therefore pay additional taxes, while for steel and aluminium it is a radical change since the 25% tariff was already in force previously.
The trade-off is access to the British market for American ethanol and beef, with a commitment to ensure imports meet British health standards. While no specific details are given, the agreement provides for greater access to American industrial products on British soil. Furthermore, British Airways has committed to purchasing $10 billion worth of Boeing aircraft over the long term.
For the US, the agreement only covers 3% of this trade. This is not significant, whereas for the UK, it covers more than 10%, which is significant.
Several observations:
The tariff rate is higher for British manufacturers than before Trump’s arrival. Therefore, it represents a cost for the British economy. Nevertheless, the deal gives them a comparative advantage over competitors who have not yet reached an agreement, particularly the Europeans.
Access to the American market will be more difficult for the British, while Americans will have easier access to the British market compared to the previous situation.
Overall, the deal is advantageous for the United States. The agreement makes the situation better for the United Kingdom than that which prevailed since April 9, but significantly worse than before Trump’s arrival.
The impact on the UK economy will be very limited, particularly on the trajectory of GDP, but on a microeconomic level it will be more complicated.
No further details about the agreement are known, and if there are any more, because the agreement was signed quickly. It is not a trade agreement that covers all sectors precisely. A treaty takes several years to be signed.
Services do not appear to be included in the agreement, as the British have a large surplus.
The agreement appears above all to be a political coup. For Donald Trump, he finally has one. For Keir Starmer, it’s a way to regain control and revive the special relationship with the United States. The British are turning toward the US, whereas they seemed determined to move closer to Europe at all costs.
Perfidious Albion