Trade or Tariffs: The Uncertain Future of UK-US Trade Relations

Robyn Montano

The United States was the United Kingdom’s largest individual trading partner in the year leading up to the second quarter of 2024, contributing 17.6% of the UK’s total trade. Despite this, establishing formal trade agreements between both nations remained on the back burner during the Biden Administration. With Donald J. Trump’s return to the White House, the possibility of UK-US trade negotiations resurfaces. However, this could push the British Labour Party into a crossroads: restoring ties with the European Union or consolidating relations with the US—that is, if the US president-elect is still interested in striking a deal with the UK in the first place.

Why Couldn't Both Countries Reach an Agreement?

In the eyes of Theresa May, the UK’s departure from the European Union was ideally the genesis of “Global Britain”— a global trading nation seeking deals with allies around the world. This aspiration seemed just within the UK’s grasp as free trade talks progressed swiftly with the US amid the final days of Trump’s presidential term. Yet, these negotiations came to a standstill almost as quickly as they started. 
One of the primary reasons contributing to this was the contrasting agricultural standards between the two countries. For instance, in the US, practises, such as washing chicken with chlorine, were permitted under their food safety regulations, which were comparably weaker than the UK’s standards that allowed only water washes. Compliance with these requirements was crucial to finalising trade deals as part of the UK's negotiating objectives to not make any compromises on their “high environmental protection, animal welfare, and food standards”. The Trump administration, however, perceived this as a form of “protectionism”, warning that they would “push this off” if the UK refused to accept non-compliant US products. 

Under the Biden Administration, despite initial plans to formulate a “foundational” agreement with the UK, further discussions regarding the negotiations were shelved. This shift in focus seemed to stem from concerns raised by the US Senate about the proposed deal's lack of thorough labour standards for American workers and the Biden Administration’s overall shift toward addressing domestic issues and prioritising economic recovery. 

Will Both Countries be Interested in Forming a Deal? 

Currently, the Labour government aims to “reset their relationship with Europe,” seeking to ease the tensions after Brexit, promote economic cooperation, and develop security ties with the continent. Prime Minister Keir Starmer has opened Britain to cooperation with European allies, including his recent visit to German Chancellor Olaf Scholz in Berlin and celebration of Armistice Day with French President Emmanuel Macron—an approach that drastically contrasts the previous administrations. Prior to this, post-Brexit European relations were laced with tension, from heightened trade friction to strained diplomatic efforts, including the denial of diplomatic status to the EU’s London delegation in 2021.

However, if the UK still seeks to have trade deals with the US, Starmer’s efforts to repair ties with Europe may be compromised, given  Donald Trump’s pro-Brexit stance. This leaves the Labour government with a difficult decision: reduce trade friction with Europe, the largest trading bloc in the world, or improve its chances of having a free-trade agreement with the US. Alternatively, it could attempt to pursue both—becoming a “beacon of stability” amid global volatility as some economists suggest. The UK could position itself as a reliable player in international trade by simultaneously building trade relations with the EU and the US.

Though, much of this is contingent on Trump’s next move. The president-elect has announced plans to implement universal tariffs between 10% and 20% on international imports, along with an additional 60% tariff on all Chinese products. His strongly assertive “America First” rhetoric potentially indicates that establishing trade deals falls lower on his list of priorities, exposing the UK’s economy at risk of significant repercussions. As the US is the country’s leading export market, industries, such as pharmaceuticals and automotive, could face severe impacts. Ahmet Kaya, an economist from the National Institute of Economic and Social Research (NIESR),claims the aftermath of Trump’s tariffs could decrease UK GDP growth by 0.7 percentage points in the first year and 0.5 percentage points in the second. 

What’s Next for the UK? 

For now, perhaps avoiding any binary option may be the UK’s most strategic approach—especially with Trump’s unpredictability, rushing into an exclusive choice could result in making unnecessary sacrifices. 

Thus, future trade relations between the two nations still remain uncertain. Even if both parties agree to revive the trade talks from Trump’s first presidency, finalising a deal could prove quite challenging. If they failed to make concessions the first time, what would make them reach an agreement the second time?