Trump’s trade deal with Britain will worry allies and rivals alike
Summary
Sir Keir Starmer will at least be pleased to have been first
Few topics inspire quite so much misty-eyed sentiment from British leaders as their country’s relationship with America. On May 8th, however, the emotion went in the other direction. “A lot of people" call Britain “our greatest ally", said President Donald Trump. “I don’t want to insult people by saying that, but I can say it’s certainly one of our greatest." Whatever Britain’s exact position on America’s list of pals, Mr Trump was glad the country was the first recipient of a trade deal after his “Liberation Day" tariff spree.
The announcement was big news for American and British beef farmers, who may now sell 13,000 tonnes of tariff-free meat a year to each other’s markets, and British carmakers, who can export 100,000 cars a year to America with a lower levy. It was also big news for trade officials around the world, as they look for clues about the Trump administration’s intentions. What are the odds of a broader tariff climbdown? After all, the deal was, according to Mr Trump, “the first in a series".
Despite the back-slapping in the White House, there is limited reason for cheer. Britain was already in the lowest group for the “Liberation Day" across-the-board tariffs, only ever facing a rate of 10%, and it received no relief in this regard. Peter Mandelson, the British ambassador to Washington, called the agreement a “springboard" for further liberalisation. Yet Mr Trump was less sure. He suggested both that the deal was going to “get bigger" and that it was “maxxed out".
The White House’s negotiations with Britain indicated that its strategy will be to go industry by industry, peeling concessions from negotiating partners on the way. For Britain, that meant a focus on agriculture, cars and steel, where it earned respite from Mr Trump’s sector-specific levies, as well as securing a promise of preferential treatment in any future rounds of tariffs. Negotiators representing both countries bypassed long-standing disputes such as a digital-services tax that Britain levies on tech giants and its food-standards rules, which block “chlorinated chicken" and the like from entering the country.
Services, which represent the bulk of trade between the two countries, were also left untouched, having mostly escaped the tariff commotion altogether. British officials indicated that talks were under way on a separate deal regarding digital trade, and that they would continue to push to lower the 10% tariff rate on goods.
Agreements with other countries are expected soon, but they will probably be limited too. The crucial question, which the settlement with Britain does not answer, is whether trading partners facing levies above 10% may at least be able to bargain them down to that floor. Stockmarkets appear to expect conciliation: the S&P 500 index of large American firms has regained the ground it lost after Mr Trump’s initial salvo. For their part, British businesses are optimistic. They expect the tariffs to be withdrawn within six months, according to polling by Boston Consulting Group.
Next up: America’s great rival. Negotiators will travel to Switzerland this weekend for talks with their Chinese counterparts. If Britain’s vaunted special relationship managed to secure only the slimmest of concessions, Communist Party cadres should not get their hopes up.
