Jonathan Reynolds, the UK’s secretary of state for business, had just finished a speech on Wednesday evening to business leaders at the Mansion House in the City of London when his phone rang.
It was his officials, members of his negotiating team who had been in discussions with their US counterparts over a trade deal. The US under president Donald Trump had proposed an agreement.
In the version he relayed to Westminster reporters on Thursday, Reynolds said he went to a side room in the Mansion House at about 8pm on Wednesday to consider the US proposal. It involved parking ongoing negotiations on the US’s across-the-board reciprocal tariffs of 10 per cent on the UK, and instead finalising a deal based only on specific sectoral tariffs, primarily cars and steel.
The US would give the UK a deal on those sectors, both critical for the UK economy in Labour’s old industrial heartlands of England’s midlands and north. But Trump wanted concessions in return on US exports of beef and ethanol, which he could show to farmers in Trump’s rural political heartlands.
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In that sense the trade deal between the US and UK was perhaps as much of political significance as economic. Both sides can say they won something for their political bases as well as their countries.
Reynolds recommended acceptance of the deal to prime minister Keir Starmer. who was holed up watching his beloved Arsenal crash out of the Champions League against Paris St Germain. Trump and Starmer swiftly held a call to iron out the last few details before both sides scrambled to arrange formal announcements for the following day, the 80th anniversary of Victory in Europe Day (VE Day) in the second World War.
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The political symbolism of announcing the deal on VE Day, of the US and UK still allies reaffirming their closeness after all these decades, was conscious and deliberate.
Reynolds told reporters that, essentially, the UK agreed to a quick deal to save the UK car industry. He said there was a fear that UK car companies, such as Jaguar Land Rover, were about to start laying off workers due to Trump’s recently imposed 27.5 per cent sectoral tariffs.
The US is a crucial market for the UK-made luxury cars such as Bentleys and Aston Martins. Under the deal car tariffs will be cut to 10 per cent for the first 100,000 vehicles that the UK sells in the US market, roughly equivalent to its total exports there last year.
On steel and aluminium, tariffs for UK exports to the US have been cut from 25 per cent to zero, which will benefit British Steel, which the UK government recently took control of from the Chinese. In addition, the US has given the UK a commitment that aerospace products will remain at zero, which protects exports of Rolls-Royce engines for Boeing jets.
In return the UK will accept about 13,000 tonnes of US beef, but not the hormone-driven growth kind of beef that would complicate relations with the EU. It will also take up to 1.4 billion litres of US ethanol for use in the manufacture of British beer.
Negotiations continue over the US’s across-the-board 10 per cent reciprocal tariffs.
The Bank of England’s 0.25 per cent interest rate cut on Thursday was probably of more significance for the UK economy than the US trade deal on sectoral tariffs. But politically at least the UK can still claim a win in the meantime.
