A very Trumpian trade deal
Only Donald Trump could make Brexit Britain look strategic
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Longtime readers will know I am hesitant to write about Australia after, well, the unpleasantness.
What it's like to go horribly, horribly viral
Tony Hsieh, the former chief executive of Zappos and fabled internet entrepreneur, was known for his killer job interview questions. One in particular struck a chord with me. Hsieh would ask candidates to name the biggest misperception that others had about them.
But I have only positive things to say about the country’s trade negotiators. Back in December 2021, the UK and Australia signed a free trade agreement (FTA). This represented Britain’s first ‘new’ trade deal since Brexit, with all other trade agreements having effectively rolled over previous deals the UK enjoyed as a member of the European Union. The general consensus was that, like most opening days at the Gabba, the Aussies got the better of the Poms.
On the British side, the deal was overseen by then-international trade secretary Liz Truss, who declared it a “win-win” that would cut tariffs, support jobs and lower prices. That Truss appeared more interested in securing shots for her Instagram profile (or that it involved her at all) was perhaps a warning sign that the UK had not necessarily secured the best possible deal.
The thing about trade deals, like any negotiation, is that size matters. Bigger nations have greater sway. In this way, the UK should have enjoyed an advantage over Australia, what with its economy being roughly twice the size and population two-and-a-half times larger. But there was another important factor at play: need.
UK ministers were desperate to show there were benefits to Brexit and that Global Britain was more than a soundbite. Truss herself was keen to burnish her credentials as a minister who gets things done and fast. What better way to demonstrate this than a deal with our Commonwealth cousins down under? Yet appearing too keen for a deal of any sort is a strategic blunder.
The UK-Australia FTA has since been panned by all (British) sides. Farmers, in particular, were unhappy. The National Farmers’ Union called it a “one-sided” deal in favour of Australian producers. George Eustice, a former Conservative MP and environment secretary, said the agreement “gave away far too much for far too little in return”. In a letter to Boris Johnson seen by the Financial Times, Eustice later wrote, “We cannot risk another outcome such as Australia where the value of the UK agri-food market access offer was nearly double what we got in return”.
So it is with understandable anxiety that British businesses may greet a trade deal, heads of terms, or whatever we are calling this agreement with the United States. America is much larger than Britain. It is far richer too. Through Nato, it guarantees our defence (I think). Therefore, any deal ought to be weighted in its favour. Except, there goes that question of need again.
Under the agreement, US tariffs on steel and aluminium will be slashed from 25% to zero, and those on car exports cut from 27.5% to 10%. The blanket 10% tariff on all UK goods will still largely apply. In return, Britain has agreed to reduce tariffs on US beef, ethanol and industrial products. Starmer has, for now at least, retained the Digital Services Tax which impacts US firms.
Look, I have no idea if this is a good deal or not. For that, you are far better off reading actual trade experts such as Sam Lowe or Alan Beattie. But what I do know is that the US president was the party in this set of negotiations more in need of a deal than the UK prime minister. Which, given everything we know about post-Brexit Britain and the relative sizes of the two economies, is really quite some doing.
It is the Trump administration that has sent the US economy into a downward spiral. It is the Trump administration that has promised to sign off 90 trade deals in 90 days. It is the Trump administration that needs to demonstrate to the financial markets that these eye-watering tariffs can be reduced and the worst impacts of the trade war mitigated. And it is Trump himself, the dealmaker-in-chief, who claimed all these countries are “calling us up, kissing my ass”. Yet, until this week, not a single deal had been signed.
This agreement will do little for the UK economy on a macro level. The effective US tariff rate on goods exported will still stand at double digits, even with the relief for steel and automakers. Nor will any deal come close to erasing the damage done when the UK ripped itself free of the EU’s single market and customs union. Nor will it do much good for the cause of multilateralism and the principles of free trade.
Still, something truly remarkable has occurred. A trade deal involving the UK in which the UK was not the supplicant. Only Trump could make that happen.
Happy Birthday Jack!
It is probably the best deal available and despite all the propaganda about Peter Mandelson, he was an effective minister in Blair and Brown’s government and may yet prove an effective ambassador.
Trump still believes that America is a dumping ground for heavily subsidised products from other countries, especially China. I doubt if I will be buying any premium American beef, no matter how it is labelled. The important thing is that Britain secured the first trade deal with America since it became independent of Britain in 1783. Now it is up to the EU to make its deal with Trump. I await in anticipation of what they achieve as they have over 400 million population as against America’s 350 million.