Trade experts and industry bodies have warned that the US-UK trade pact leaves a host of unanswered questions that will need to be resolved via further negotiations.
The deal covers just five pages of text providing only the outline of an agreement that was pulled together in just six weeks following US President Donald Trump’s “liberation day” tariffs announcement on April 2.
The document, published on Thursday, notes that it “does not constitute a legally-binding agreement” and that both sides must now begin talks “to develop and formalise” the proposals, which will allow the UK to escape the worst of Trump’s global tariff regime.
Beef and bioethanol
The White House claimed the deal presented a “$5bn opportunity” for US farmers to export to the UK, but contained detail in only two areas: a 13,000 tonne tariff-free reciprocal beef quota, and a UK promise to remove its existing 19 per cent levy on 1.4bn litres of US ethanol.
The two sides said they would “work together” to improve market access for other agricultural products but did not specify which or over what timeframe. The White House noted that the UK “unfairly” maintained tariffs of up to and over 125 per cent on meat, poultry and dairy from the US.
The UK farming and biofuel sectors said they were still trying to ascertain whether the tariff-free quota applied to all ethanol, including for use in fuel, or just ethanol used in food and drink production.
The National Farmers’ Union warned that arable farmers who sold wheat to biofuel producers could lose a profitable income stream if the quota applied to fuel. Up to 15 per cent of UK domestic demand for wheat came from biofuels, the NFU added.
The UK has two biofuel plants: Ensus, in Teesside, and Vivergo, in East Yorkshire, which is owned by British retail, sugar and grocery conglomerate Associated British Foods. Ensus said the deal raised “very significant questions” around the viability of manufacturing bioethanol in the UK and that it was waiting for details from the government.
The Agricultural Industries Confederation, which represents the UK’s feed sector, said the removal of the 19 per cent UK tariff on US ethanol “requires further clarity”.
“The government needs to consider how it can ensure the competitiveness of this sector is maintained,” said Edward Barker, AIC head of policy.
Setting standards
Trade experts also noted the agreement raised the issue of whether the UK would recognise US industry standards-setting bodies as international standards bodies — a long-standing ask of American trade negotiators.
Currently, the UK is also part of a 34-country European regional grouping that mirrors the international system of standards-making based around World Trade Organization definitions, while the US system is more commercially driven.
International rules cover a vast range of products and services and how business is conducted, according to Scott Steedman, director-general of standards of the British Standards Institution.
He said the US request risked “muddying the waters” around the UK’s commitment to the international governance structures of standards.
Peter Holmes, fellow of the UK Trade Policy Observatory at Sussex university, added that while the deal did not commit the UK to lowering standards, it risked the UK diverging from its current position in Europe, making the impending EU-UK “reset” harder.
“The UK has to be very careful of actually negotiating an agreement that might weaken consumer protection, or which causes us to diverge from the EU position on standards and regulations,” he said.
Pharmaceuticals
Drugs industry observers say the US-UK deal leaves many crucial matters unclear, including proposed tariff rates, rules on supply chain security and intellectual property, and British policy towards the sector.
The pact promises to offer the UK “significantly preferential” treatment if and when Washington imposes tariffs on pharmaceuticals, which are the subject of a so-called Section 232 investigation as to whether tariffs should be applied as a matter of national security.
The probe, which will conclude by the end of the year, comes in the context of rising US concern over dependence on China for critical products. China is a big global source of active pharmaceutical ingredients (APIs), which are crucial components of medicines.
Another uncertainty relates to a British pledge to “endeavour to improve the overall environment for pharmaceutical companies operating in the UK”.
The industry is already in talks with the UK government over prices paid by the National Health Service for drugs.
Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry lobby group, said imposing tariffs would make it harder to maintain supply chain resilience and ensure patients in both countries have access to medicines and vaccines they need.
“Although this initial deal is only a first step for pharmaceutical products, we remain convinced that reaching a favourable outcome remains possible and in the interests of both countries,” he added.
Steel and aluminium
Steel and aluminium manufacturers were left struggling to understand the impact on their business after the document failed to explicitly confirm the “zero tariff” agreement announced by UK Prime Minister Sir Keir Starmer on Thursday.
UK Steel, the main industry lobby, said the uncertainty was already affecting some sales as customers hold off on placing orders in the hope that details would become clearer in coming weeks.
There were still questions as to the conditions that need to be met in order to address Washington’s concerns about squeezing China out of supply chains for strategically vital materials.
“The terms of the deal highlight a number of hoops to jump through before the UK steel sector can see the benefits of this deal,” UK Steel added. “To fully assess the impact on our sector, we will need to fully understand the supply chain conditions that need to be met, how the quotas will be defined and when these will take effect.”
A senior UK official said the deal would lead to the majority of UK steel exports to the US attracting a zero tariff, although some specific categories of steel would still carry levies of up to 3 per cent. “The max is 3 per cent, but most will be at zero tariffs,” they added.
Noble Francis, economics director at the Construction Products Association, said it was also unclear whether the deal covered steel used in derivative products such as vehicle parts, industrial components and household goods that were initially included in Trump’s announcement of the 25 per cent steel tariffs in March.
“It is critical that firms get clarity on this as soon as possible as it could have a major impact on their exports to the US,” he added.
Aerospace
UK aerospace executives on Friday said there was still uncertainty about the details of the trading terms for the sector even though officials insisted that “all UK aerospace parts” were tariff-free.
There was “no mention” of aerospace in the official draft documents from the UK government, said one, adding that companies were still waiting for confirmation in writing before publicly welcoming the trade deal with the US.
Executives also said that given the integrated nature of the supply chain, they were trying to establish whether “all aerospace” parts drawn from different countries would be exempt from tariffs, or just those sourced from the UK.
Industry on “both sides of the Atlantic need to see a 0 per cent tariff applied on aircraft parts — it has been critical to air safety for almost half a century”, said Kevin Craven, chief executive of trade group ADS. The industry was calling for this to be confirmed “as soon as possible”.
There is also uncertainty over what the deal means for military aerospace, such as the F-35 fighter jet programme led by US defence group Lockheed Martin. Britain is the US’s only Tier 1 partner for the F-35, with UK companies contributing about 15 per cent of the value of each aircraft.
Lockheed, as the importer of parts into the US, has been shouldering the burden of the tariffs, according to analysts. Several crucial parts are delivered first to Lockheed Martin in the UK before being shipped to the US, according to people familiar with the situation.
The White House said the agreement with the UK “maximises the competitiveness and secures the supply chain of US aerospace manufacturers through preferential access to high-quality UK aerospace components”.
