Kate Andrews, the Economics Editor at the Spectator, shares her insights on the groundbreaking US-UK trade deal. She discusses the removal of tariffs on steel and aluminum and the significant cuts to car export tariffs. The implications for both the Labour government and Donald Trump are examined, raising questions about who truly benefits from the agreement. As protectionist policies loom large, Andrews also highlights the shifting geopolitical landscape and the deal's potential effects on international trade relations.
The UK's trade deal with the US marks a significant political win for Keir Starmer, emphasizing his influence on the global stage.
Despite tariffs being reduced, the deal's limited impact on the economy raises concerns about its ability to stimulate growth.
Deep dives
Historic Trade Deal Between the UK and US
The UK has signed a significant trade deal with the US, marking a major achievement for Prime Minister Keir Starmer in a challenging political landscape. While described as historic, the deal is more specific than a comprehensive free trade agreement, focusing mainly on areas like defense and agriculture, which are deemed critical for national security. The Americans have compromised on key issues, such as allowing British access to certain agricultural products without the usual tariff restrictions that would have been expected in prior negotiations. However, the deal does not eliminate the 10% universal tariff, which remains a substantial concern for the UK, suggesting that while progress has been made, further discussions and modifications will be necessary.
Economic Implications and Ongoing Concerns
Despite the optimism surrounding the trade deal, analysts remain cautious about its immediate economic impact on the UK, indicating that it may not significantly alter current inflation forecasts or overall growth. The inclusion of a cap on car exports to the US highlights the complexities and limitations of the agreement, as it suggests a conditional easing of tariffs rather than a complete liberalization of trade. Furthermore, the persistent presence of tariffs serves as a reminder of the challenging economic environment, raising questions about how long it will take for the UK to recover from previous trade setbacks. Overall, while the deal is seen as an improvement, it reinforces the idea that the UK is still navigating a difficult economic landscape.
Political Ramifications and Future Prospects
The trade deal has broader political implications, potentially reinforcing Keir Starmer's position as a significant leader on the international stage, especially in relation to US politics and the war in Ukraine. Starmer's successful negotiation of the deal allows him to present himself as a capable and influential figure, capable of engaging with global leaders like Donald Trump, which may enhance his standing among voters back home. However, the deal also reflects the changing dynamics of trade relationships and suggests ongoing challenges for the UK as it seeks to balance its interests amid rising protectionism. Overall, Starmer's ability to handle such negotiations could play a vital role in shaping his political future and the Labour Party's prospects in upcoming elections.
It’s a massive day for the Labour government and for Keir Starmer, as the UK becomes the first country to sign a trade deal with the US following the tariff turmoil of last month. Donald Trump described it as a ‘full and comprehensive deal’ … although we are still waiting for some of the details to be thrashed out. What we do know is this: the 25 per cent tariff on UK steel and aluminium has been removed and the rate on most car exports has been slashed from 27.5 per cent to 10 per cent. In return, the UK is removing the tariff on ethanol for US goods and has agreed ‘reciprocal market access on beef’. So far there is no word on the digital services tax, and Britain is still liable to pay the 10 per cent baseline tariff rate.
On both sides of the pond, the deal is being described as ‘historic’ by leaders who – for their own reasons – could really do with a win. But who does this deal favour? Is it a coup for Starmer – or Trump?
Oscar Edmondson speaks to Kate Andrews and Michael Simmons.
Produced by Oscar Edmondson.
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