The United States has announced a ‘breakthrough deal’ with the United Kingdom that would create an aluminium and steel trading zone and secure the pharmaceutical supply chain.
The deal affirms that “reciprocity and fairness is a vital principle of international trade” and increases access for US agricultural products, US President Donald Trump said on Thursday, though he added that the final details were still being written up.
“The final details are being written up,” Trump told reporters. “In the coming weeks, we’ll have it all very conclusive.”
The deal, the first one struck by the US since Trump imposed his far-reaching tariffs, is also said to strip back paperwork for British companies looking to export to the US.
The president said that the agreement would lead to more beef and ethanol exports to the UK, which would also streamline the processing of US goods through customs.
The White House said that the deal will bring in $6bn in external revenue from its 10-percent tariffs, which will stay in place, but that it would also bring in $5bn in new export opportunities. The UK agreed to lower its tariffs to 1.8 percent from 5.1 percent and provide greater access to US goods.
The US already runs a trade surplus with the UK, making it a bit easier to find common ground, as Trump has staked his tariffs on specifically eliminating the annual trade deficits with multiple nations that he says have taken advantage of the US.
British Prime Minister Keir Starmer joined the president in the announcement over the phone. Starmer said the deal would boost trade and create jobs.
Thursday’s announced agreement is the first agreement since the Trump administration started a global trade war with universal levies of 10 percent. The US has also imposed 25-percent tariffs on cars, steel and aluminium, 25-percent tariffs on Canada and Mexico, and 145-percent tariffs on China. US and Chinese officials are due to hold talks in Switzerland on Saturday.
British implications
Starmer has struck up a warm relationship with Trump since his centre-left Labour Party was elected in July.
Starmer’s government has been seeking to build new trading relationships post-Brexit with the US, China and the EU without moving so far towards one bloc that it angers the others.
Economists and one chief executive of an FTSE 100 company — the highest capitalised blue chip companies on the London stock exchange—said the immediate economic impact of a tariff deal was likely to be limited but that trade agreements in general would help long-term growth. The UK struck a free trade agreement with India this week.
The US and the UK have been aiming to strike a bilateral trade agreement since the British people voted in 2016 to leave the EU, allowing the country to negotiate independently of the rest of the continent. Then-Prime Minister Boris Johnson touted a future deal with the US as an incentive for Brexit.
The US ran a $11.9bn trade surplus in goods with the UK last year, according to the Census Bureau. The $68bn in goods that the US imported from the UK accounted for just 2 percent of all goods imported into the country.
Markets respond
The US has been under pressure from investors to strike deals to de-escalate its tariff war after Trump’s often chaotic policymaking upended global trade with friends and foes alike, threatening to stoke inflation and start a recession.
Top US officials have engaged in a flurry of meetings with trading partners since the president on April 2 imposed a 10-percent tariff on most countries, along with higher rates for many trading partners that were then suspended for 90 days.
On Wall Street, US markets were responding to the news amid hopes that this could be enough to ward off a recession.
As of 11:30am ET in the US (15:30 GMT), the S&P 500 was up 0.97 percent and on track for an 11th gain in the last 13 days. The Dow Jones Industrial Average was 1.02 percent higher and the tech-heavy Nasdaq composite was 1.17 percent higher than market open.
Stocks have been swinging for weeks with hopes that Trump could reach deals with other countries that would lower his tariffs, which many investors believe would cause a recession if left unchecked.
