By John Foster
Although Trump’s America First approach undermined the “special relationship” with the UK, both countries still expect to benefit.
And so it was that a trade deal materialised this week, proclaimed with great fanfare by the White House.
Things have been rather bleak in the United Kingdom since Brexit. Even after the revolving door of Tory leadership ended, the benefits of separating from Europe have been difficult to perceive.
Turning away from Brussels was supposed to mean pivoting smoothly towards Washington. Donald Trump’s rise to power made that difficult. And now that he is back in the White House, things are much worse.
The actual nature of the trade deal can be gleaned from the title of Gaby Hinsliff’s article in The Guardian: “Britain Hasn’t Agreed to a Trade Deal with the US – It’s Ended a Hostage Negotiation.”
A few data points confirm the accuracy of this assessment:
Under the deal, the White House has agreed to eliminate the 25% tariffs it previously imposed on British steel and aluminium exports, providing at least a modicum of relief to the UK's metal industry. Tariffs on British car exports to the US will be reduced from 27.5% to 10% for up to 100,000 vehicles annually.
In return, the UK will lower its average tariff on US goods from 5.1% to 1.8%, broadening access for American products such as beef, ethanol, and machinery. Notably, the UK has committed to purchasing $10 billion worth of aircraft from Boeing.
Despite these concessions, the US maintains a baseline 10% tariff on most British goods, which continues to pose challenges for UK exporters.
The trade deal is expected to create approximately $5 billion in new export opportunities for American businesses.
While the deal provides Keir Starmer’s Labour government with a modicum of tariff relief in key industries, a large proportion of Britain’s trade with the US will still be subject to significant tariff barriers.
The energy expended by both sides to spin this deal as a major step forward demonstrates its brittleness.
The Trump Administration was quick to characterise the agreement with Starmer as the first of many—nothing special, in other words—to divert attention from the conflict on everyone’s mind.
Even if further deals are just over the horizon, none will likely involve China. The Chinese bargaining position is too strong for the American president to strong-arm or glad-hand them.
Instead, we have a deal whose best-case scenario from the American perspective would amount to a rounding error in the face of the $900 billion US trade deficit.
The United Kingdom is only responsible for about 3% of US exports. Since Washington was already running an annual trade surplus of nearly $12 billion, the deal has done little to stop foreign countries from “ripping us off”, as Trump complains.
From the British perspective, this agreement is so crushingly mediocre that Starmer’s government views it as a kind of loss leader that will make possible a better deal, or that Trump has a dossier full of kompromat on the royal family.
The United States receives between 20 and 25% of the UK’s exports of goods and nearly 30% of its external trade in services. These would be important numbers at the best of times, but in the current circumstances, they are crucial.
Whatever the presumptive benefits of greater sovereignty that may have resulted from Brexit, one clear outcome has been a sharp decline in trade with the European Union. Britain has struggled to recoup these losses, which in some sectors exceeded 30%.
While the US represented one possible partner toward whom flows of trade might be redirected, Donald Trump’s reshaping of American politics meant that any positive alteration in the terms of trade was bound to come with strings attached.
In the wake of Brexit, the gravity of the challenges posed to the UK’s foreign trade quickly became clear. During Trump’s first stint in the White House, he suggested he might be willing to make a deal, but only at a very high price, like selling the National Health Service (NHS) to American buyers.
At the time, that demand was regarded as pettifogging. However, Trump’s surreal meeting with newly elected Canadian Prime Minister Mark Carney earlier this week, in which he repeatedly suggested that Canada might one day be sold to the United States, casts a different light on his previous suggestion about the NHS.
It’s worth noting that American reactionaries like Trump misunderstand the UK just as much as they misunderstand Canada. Although Britons justifiably complain about the failings of the NHS, few would trade it for the vagaries of the US system, in which the emergency room is the primary care provider for more than 20 million people.
The Anglo-American trade deal is less than the sum of its parts. It does little to address the decline of foreign trade in the United Kingdom and is unlikely to meaningfully impact consumer prices or the balance of trade in the United States.
The deal is significant nonetheless, based on what it shows about both sides. Whatever Keir Starmer might think about the US and its current political direction, he cannot afford to get on the wrong side of the Trump Administration, which is prepared to punish friend and foe alike, even if it damages the domestic economy.
The Trump Administration has painted itself into a corner. The negotiating strategy that the president and his acolytes prefer works best for speculative projects against soft targets. However, it simply cannot gain traction against Canada, Mexico, and China.
The level of economic interrelation between Washington and its major trading partners precludes the unilateralism that Trump desires. As the president is discovering, the vicissitudes of supply chains and globalised production cannot simply be navigated with threats and tantrums.
The United States and its trading partners are like the Corsican brothers in Dumas's eponymous story. They share an unbreakable bond, and pain on one side is invariably felt on the other.
Britain's premier is in the unenviable position of leading a country that has made a terrible decision, for which he is now the executor. Separating from Europe meant, inevitably, moving closer to Washington. This might have been a viable strategy if America were—or were soon likely to be— under stable leadership.
But who would now predict that? And, in one of the sadder ironies of postwar European politics, Labour is now likely to be challenged more by the far-right Reform UK, the zombified remnants of UKIP, who were instrumental in creating the problem in the first place.
Keir Starmer is caught in a bind similar to that of America's Democratic Party. His distaste for the left is such that the only move he understands is lurching to the right in search of a pool of centrist voters, not realising that they decamped for the outer fringes long ago.
Lacking ideas or anything approximating a coherent positive strategy, Starmer’s government grasps at straws like this trade deal. But having his lunch money taken by incompetent American trade negotiators makes him look like a patsy. That won’t cut much ice with the voters back home.
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Photograph courtesy of Number 10. Published under a Creative Commons license.