PM Starmer happy about UK-US deal, but what does it say about Trump's long-term trade strategy?

Straits Times

09-05-2025

US President Donald Trump boasted that the deal was 'full and comprehensive', and British Prime Minister Keir Starmer was equally happy, calling May 8 a 'fantastic, historic day'. PHOTO: AFP
News analysis PM Starmer happy about UK-US deal, but what does it say about Trump's long-term trade strategy?
– Writing on Truth Social, his preferred social media platform, US President Donald Trump claimed it was a 'great honour' that Britain became the first country to sign a new trade deal since he announced sweeping global tariffs on most countries.
Mr Trump also boasted that the deal with the Britain was 'full and comprehensive'.
British Prime Minister Keir Starmer was equally happy; he branded May 8 – the date when the agreement was concluded – a 'fantastic, historic day'.
However, although noteworthy, the Britain-US deal's primary significance is mainly political.
It tells us next to nothing about Mr Trump's long-term trade strategy.
Nor can it serve as a pointer to any other trade agreements Washington may seek to conclude with key partners such as China, Japan or the European Union, all of which are in a different predicament from the British.
The US is Britain's single biggest trade partner. Just over 16 per cent of all British exports go to the US, double the volume of exports to Germany – its next-largest trade partner – and about four times more than Britain's sales to China.
So, in terms of their exposure to Mr Trump's trade tariffs, the British are as vulnerable as Canada or Mexico, Washington's closest neighbours.
However, the British enjoy one advantage: their trade with the US is roughly balanced.
Indeed, the US Bureau of Economic Analysis calculates that Washington enjoyed a healthy US$14.5 billion (S$18.82 billion) surplus in total trade with Britain in 2023, the last year for which full figures are available.
Britain's statistical agency, which collects data differently and calculates trade in services differently, thinks that Britain enjoys a healthy trade surplus with the US.
Yet, for obvious reasons, British officials are in no rush to dispute the American figures.
So, Britain was often held up by the Trump administration as a model for other nations.
Mr Robert Lighthizer, the US trade representative during Mr Trump's first presidential term, claimed that commerce with Britain is 'how trade is supposed to work'.
And soon before he came to office, Mr Jamieson Greer, the current US trade representative, told lawmakers in Washington that a new trade deal with Britain was at the top of his agenda for the second Trump term.
Mr Trump also has a personal soft spot for the British.
His beloved mother – her picture is always prominent behind his work desk in the Oval Office – came from Scotland. Mr Trump's first foreign businesses were in Britain, and the President frequently refers to the two golf courses he owns in Scotland.
Mr Trump is also an avowed fan of the British royal family. Mr Starmer took advantage of this during the meeting in Washington at the end of February: In the full blaze of media cameras, he presented Mr Trump with a formal invitation to a state visit, signed by King Charles III, the British monarch.
Personal preferences also coincide with political calculations.
Mr Trump has faced a chorus of domestic criticism about his tariffs and growing evidence from opinion polls that ordinary Americans are beginning to worry about the effect of their President's trade wars on the prices and availability of consumer goods.
The President has spent the past few weeks claiming that countries 'are lining up' and even 'begging' him to sign new trade deals.
In recent days, officials from his administration have also repeatedly spoken of 'progress' in talks with South Korea, India, Japan and Indonesia.
But since no concrete progress had emerged, Mr Trump ultimately had to show some results, and Britain proved to be the ripest political fruit, ready for picking.
The deal's conclusion also vindicates the British Prime Minister, who can plausibly claim that his blend of flattery and quiet diplomacy has made Britain the first nation to sign a trade deal with Mr Trump.
The US agreed to eliminate the 25 per cent duty on British steel and aluminium, a lifeline to the ailing British steel industry, for which the US is an important export market.
American tariffs on up to 100,000 British cars will also be reduced to 10 per cent, down from the 27.5 per cent rate Mr Trump initially announced.
The US is the primary export market for British cars. The number of vehicles now subjected to preferential duties is more or less equal to the volume of British car exports.
American and British beef farmers will also be free to sell meat to each other's markets.
However, the limitations of the new trade deal are equally important.
To start with, Britain is still subject to a 10 per cent US tariff imposed on almost all trading nations.
Britain's pharmaceutical sector, accounting for around 15 per cent of all British exports to the US, is merely promised 'preferential treatment', a concept whose meaning remains obscure.
As a result, leading British pharmaceutical companies such as GSK and AstraZeneca remain concerned about Mr Trump's intentions.
And problems with Britain-US trade in services, particularly digital services, remain unaddressed.
As British Ambassador to Washington Peter Mandelson said, the agreement is merely a 'springboard' for further trade liberalisation.
The only meaningful conclusions that America's other trading partners can draw from the deal signed with Britain are that the US administration prefers agreements on individual sectors of the economy, rather than negotiating overall free trade treaties.
Washington also remains determined to push for more unrestricted access for American farmers. Apart from beef, these problems remain unaddressed even in the latest deal with Britain.
But beyond this, the Britain-US agreement offers few clues to other trading nations, and no clues to Chinese negotiators now sitting down to trade talks with their US counterparts.
Jonathan Eyal is based in London and Brussels and writes on global political and security matters.
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