US-UK trade announcement: “this isn’t a deal, it’s an amuse-bouche”
The morning after the US-UK trade agreement was announced, experts are beginning to wrap their heads around what the deal entails, and reactions are trickling in.
The overriding sense is that in the absence of any granular detail on what the deal means for several industries, there is still hope that the UK government can deliver favourable terms.
In effect, the past few weeks have been “talks about talks,” trade experts say, as the real negotiations haven’t taken place yet. This is normal in “Trump world.”
However, despite tentative optimism on the UK’s end, Trump’s posts on Truth Social are selling the deal as a US win at the direct expense of the UK.
No trade deal clarity
This scarcity of information on the terms of the deal is not characteristic of usual trade announcements, as seen from the UK-India trade agreement.
Even within the government, it’s unclear exactly what this deal will look like.
Gregor Poynton, Labour MP and member of the Business and Trade Committee, said: “From the early indications, this looks to be a great deal for the UK, opening up the world’s largest economy to our exceptional British products and innovation.”
Others are less bullish.
Professor Simon Evenett, co-chair of the World Economic Forum’s Council on Trade and Investment and former World Bank Economist, said, “This isn’t a deal; it’s an amuse-bouche.” Evenett called the deal “thin” and said it “falls short of expectations.”
For Evenett, the deal was announced before it had much substance because “the President needed a short-term win to reassure the financial markets,” something that has worked, at least in Europe.
The UK automotive industry has been touted as one of the biggest winners, but it remains to be seen which companies are set to benefit.
The deal specifies that the first 100,000 UK cars imported into the US will be subjected to a 10 per cent tariff, and every car sold after that will be subjected to a 25 per cent tariff.
Either the government will allocate (or auction off) the first 100,000 slots to specific companies, or it will be a “first come, first served” system, or “free for all,” wherein UK companies will sell cars in the US with the more favorable tariff rate until they hit the 100,000 mark.
Evenett said that fundamentally, the UK is worse off than it was at the start of the year but better off than it was post-Trump Tariffs.
“Maxed-out deal”?
While President Donald Trump said yesterday that this is a “maxed-out deal,” several industries are still unsure where they stand.
Karen Betts, Chief Executive of the Food and Drink Federation, said: “There is obviously still the question of the 10 per cent tariff that continues to apply to food and drink exports.”
Betts added that the US is the UK’s third biggest food and drink export market, worth £2.7bn last year. As many of these exports are produced by smaller or medium sized companies, “[g]overnment can make a real difference here by providing greater practical guidance,” Betts said.
Tech talks
Tech has always been a major component of trade discussions with the US. Trump pushed for the UK’s two per cent digital services tax (DST), affecting US tech giants like Meta and Apple, conceiving them to be unfair and discriminatory.
POLITICO reports the UK government will be gunning for wide-spanning terms on tech, including AI, but that the US will still be pushing for the DST to be cut.
A senior Labour MP told City AM that the two per cent was “chicken feed” for US tech giants, but that it’s “a matter of principle” to them.
The Exchequer stood to raise £800m from this tax this year, the loss of which won’t constitute “a black hole” in the budget, the Labour MP says, but which has still been earmarked for public funding.
Evenett said the UK government has “kicked the ball into the long grass. They’ve said we’re going to negotiate on digital trade matters, but they did not say anything about [the digital services] tax being included in their negotiation. But they didn’t say it wasn’t either.”
Julian David, CEO of techUK, remains ambitious. He hopes that that momentum from this deal should be used towards enabling “trusted data flows, regulatory alignment, and resilient, innovation-led growth,” and “[e]mbedding emerging technologies – from AI to quantum – into this framework.”
The anti-China alliance
A trade expert tells City AM that “the announcement implies that the US and UK will strengthen UK-US cooperation on economic security matters, which likely means tightening regulations to ensure UK technology is not exported to China.”
Evenett said: “A lot of [the deal] has been framed in terms of increasing the economic security of both the US and the UK. And that’s seen on US terms [to mean] essentially freezing out China wherever possible.”
“The UK Government is being invited to stand next to the United States in its opposition to China on economic security. London will have to decide how far they want to go on this,” Evenett added.