First the good news. A trade agreement between the largest and the sixth-largest economies on the planet is (in every sense) a big deal. Former President Barack Obama threatened to put Britain at the “back of the queue” if it voted for Brexit. In the event, Britain has ended up at the front.
Now the bad news. U.S. tariffs on the United Kingdom are still higher than they were before the craziness of April 2. The two justifications for those tariffs, that they would make other countries open their markets and that they would eliminate U.S. trade deficits, have been shown to be nonsense. The U.K. has further reduced its negligible tariffs against the United States, and American trade with Britain was already in surplus, but the 10% rate has not been removed. Despite some quotas and exemptions, trade between the two great English-speaking democracies is still more restricted than it was two months ago.
Things won’t necessarily end there, of course. Ever since the “Liberation Day” announcements, British negotiators have thought in terms of a two-stage deal: A stopgap agreement to suspend tariffs, followed by a comprehensive deal later in the year. This second deal would be the big one, covering services, procurement, digital regulations, and other nontariff barriers. Although President Donald Trump is obsessed with trade in physical goods, invisibles are vastly more important to both the American and British economies.
Prime Minister Keir Starmer spoke explicitly of extending the deal, which his ambassador to Washington, Peter Mandelson, called a “springboard.” Trump was more ambiguous, referring to the deal just concluded as “comprehensive” and “maxed-out,” but then adding, “This is a very conclusive deal, but we think we can grow it from that.”
Here, as the Brits saw it, was an emergency measure to suspend the 25% tariff on British cars, a rate that would have decimated the luxury brands that dominate exports to the US: Jaguar, Aston Martin, Rolls-Royce, Bentley.
The serious stuff, on this reading, is still being finalized, and we should look forward to a proper signing ceremony toward the end of the year when Trump makes his second state visit to the U.K. If all goes well, the Balmoral Trump Accord or whatever it is called (my guess is that, in deference to the president’s sensitivities, neither “free” nor “trade” will be in the title) will be ratified before the midterm elections.
That, at any rate, is the theory. In practice, I wonder whether the will is there. I had thought that, at least in Britain, there was still some support for free trade, a policy with which no other country has been so historically associated. Recent weeks, though, have seen the very sudden growth of a British MAGA tendency on trade.
Two days before the U.S. deal, the U.K. had signed a free trade agreement with India — the fourth (soon to be third) economy in the world. Unlike the American accord, this one genuinely was comprehensive, covering services as well as the meaningful removal or tariffs. The previous Conservative government had negotiated 95% of it, and the current Labour administration took it over the line. It should have been an unequivocally positive story.
But within minutes, Nigel Farage had suggested that the deal would somehow make it easier for Indian migrants to come to the U.K. In fact, it had nothing to do with migration, being a trade deal. Farage was latching on to an agreement to avoid double taxation and presenting it as an immigration measure.
Depressingly, the Conservatives soon followed him in making this bogus claim and, before the ink was dry, the whole treaty was being denounced as some kind of globalist scam against working people. Who needed Indian imports anyway, asked politicians and pundits who knew better. Why couldn’t we just make what we needed ourselves?
INDIA AND PAKISTAN ARE OUR FUTURE
We could, obviously; and we would enjoy the medieval levels of poverty that went with it. The trouble is that no one wanted to say so. Those of us who pointed out that the deal would not increase migration were told to “read the room”. I was reminded of the demented summer of 2020, when any claim made by a BLM supporter, however obviously untrue, had to be entertained because it represented someone’s “lived experience”.
As the mood on both sides of the Atlantic turns introverted and autarkic, it is harder to imagine the kind of deal that would make a big difference, one based on across-the-board mutual recognition, getting through either Parliament or Congress. Tragically, this week’s limited accord may be as good as it gets.