Britain Set to Sign First Deal to Cut Trump-era Tariffs in Historic Trade Breakthrough

 

Britain Set to Sign First Deal to Cut Trump-era Tariffs in Historic Trade Breakthrough

  

The United Kingdom and the United States are poised to announce a deal on Thursday aimed at lowering tariffs on certain goods, marking the first such agreement since former U.S. President Donald Trump's tariffs sparked a global trade war. The deal is expected to be limited in scope but significant as a step toward easing trade tensions.

In a series of posts on Truth Social, Trump indicated he would hold a 10 a.m. EDT (1400 GMT) Oval Office news conference to discuss a "full and comprehensive" trade agreement with Britain, though no specific details have been provided yet. The likely agreement will largely focus on reducing Trump's new tariffs on cars and steel—two sectors hit hardest—potentially including some agreements on other sectors, but it probably won’t constitute a comprehensive free trade deal.

To facilitate the tariffs reduction, Britain is expected to lower its own tariffs on U.S. cars, while the U.S. had hoped for adjustments to Britain’s digital sales tax, which currently impacts American tech companies. Trump expressed pride in making the UK the first to reach such an agreement and hinted at additional negotiations in the pipeline.

The move comes amid increasing pressure from U.S. investors and businesses for the government to de-escalate the trade war that erupted after Trump’s 2018 tariffs, which disrupted global supply chains and threatened inflation and recession. Since April 2, the U.S. has imposed a 10% tariff on most imports, along with 25% tariffs on autos, steel, and aluminum, and a hefty 145% tariff on Chinese goods. Talks with China are scheduled for Saturday in Switzerland.

Jake Colvin, president of the U.S. National Foreign Trade Council, welcomed recent progress, emphasizing that businesses are eager to see how extensively tariffs are removed and how the UK’s longstanding issues are addressed.

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Warm Relations and Economic Challenges:

Prime Minister Keir Starmer, who has developed a notably amiable relationship with Trump since July, is expected to speak later Thursday. Britain’s economy has been under strain, with tariffs contributing to manufacturing setbacks—Jaguar Land Rover paused US shipments for a month, and the government had to take control of British Steel to keep it operational. Retailers with US ties warn they may have to rethink supply and pricing strategies.

Britain has refused to lower its food standards—closely aligned with the EU—in ongoing negotiations, though some American producers without growth hormones or antimicrobial washes may gain easier access to the UK market. The status of the 10% "baseline" tariff or potential tariffs on pharmaceuticals remains unclear. The UK exported roughly £7.2 billion ($9.6 billion) worth of medicines to the U.S. last year, making it a key sector.

Trade Balancing Act and Political Risks:

Starmer’s government aims to forge new trade relationships independently post-Brexit without alienating the EU, China, or the U.S. Economists suggest that while the immediate economic impact of the tariffs deal will be modest, successful trade agreements can boost long-term growth. Britain recently signed a free trade deal with India.

However, domestic politics add complexity. Polls show that public support for the government remains low, making decisions like cutting taxes for multinational tech firms risky. The digital service tax—a 2% levy on UK revenue from online platforms introduced in 2020—has been controversial, with big tech companies passing increased costs to consumers and sellers.

A senior executive, speaking anonymously, noted that while trade deals with the U.S., India, and others are crucial for long-term economic health, they won’t produce immediate euphoria.