The key diplomatic win here is that it leaves the UK open to do a full EU deal on, for example, food standards.
Economically this US deal is relatively small, although important to very specific sectors.
It rolls back on some of the trade damage done by Trump’s original announcement, in particular to the car industry. An insider told me the move from 27.5% to 10% would effectively save UK car exporters over £1bn from what was an “existential threat” to the industry.
While no longer existential, this remains painful. It is unclear how the quota will function, how it will account for foreign parts, for example, Chinese batteries, and is limited to 100,000 cars. JLR’s much heralded new Jaguar was launched in the US with the hope of growing this number.
The flip side of this is agricultural access for the US, for example, for beef, which is also subject to a quota. Other things were notable by their absence. There was no move on the digital service tax, or on tariffs for US cars.
The biggest single decision, however, is the fact that the 10% so-called reciprocal tariff stays, even though the UK buys more from the US than the other way around. This confirms that the tariff is not negotiable for anybody, and could have wider consequences.
Commerce Secretary Howard Lutnick’s White House slideshow appeared to point to a rather one sided “deal” where the UK had offered the US “unprecedented access” in order to save its car industry.
The US had trebled tariffs on the UK from 3.4% to 10%, and the UK has cut its tariffs by two-thirds from 5.1% to 1.8%. It does not seem very “reciprocal”.
There is an important “but” here. The UK and US view these numbers through very different lenses.
From the US perspective, the trebling of tariffs is a tax on foreigners that “wins” revenue for US Treasury. From the UK perspective, the tariff is a tax on domestic consumers that increases inflation, so a lower value is in and of itself good.
Over at the Bank of England, the lack of retaliation and acceptance of diverted goods from Asia are among the reasons that inflation is now rising more gently, which has enabled today’s interest rate cut with more to come.
The Governor Andrew Bailey told me that he hoped the deal would mark the first of many which would calm global trade tensions.
The real win here could be that this agreement on tariffs will keep the US sweet whilst leaving the door open to a substantive deal with the European Union.
By maintaining UK food standards and not, for example, accepting hormone treated beef or chlorinated chicken, a “full fat” food and farm export deal with the EU, similar to Switzerland’s, is now clearly on the cards in the next fortnight. This could slash post Brexit red tape for key exporters both ways.
Then you have an overall picture of a growing economy, with good trade relations with the US, EU, India and soon the Gulf too, with rates being cut.
The Government will try to project the UK as an oasis of trade and political stability in a tumultuous world, after years of turmoil. It is a world away from the recessionary negativity at the turn of the year, and it might just work.
