Trade Agreement Announcement
President Donald Trump has teased an important trade announcement that was made on Thursday. A source familiar with the government’s plans revealed to CNN that the deal will take place with the United Kingdom. This is another sign of a possible relief of historically high tariffs that have threatened serious damage to the United States and global economies.
Background
"Big press conference tomorrow morning at 10:00 a.m., the Oval Office, about a large trade agreement with representatives of a large and highly respected country. The first of many !!!" Trump posted on Wednesday evening on his social media platform. In his post, Trump did not state which country, but his administration has proposed that it is in active negotiations with India, Great Britain, South Korea, and Japan.
Trade Negotiations
Peter Navarro, Trump’s top trade advisor, announced on Tuesday that he suspected that Great Britain could be the first country to sign a trade agreement with the United States. "I do not know whether it will be in Great Britain or India first – we have a small turn in history in India so that things could slow down there, but I can assure the American people that there will be business and they will give very good offers for the American people," said Navarro.
Potential Agreement Terms
The Finance Times reported on Tuesday that a British trade agreement could be announced this week and could relieve the United States from some non-tariff trade barriers, including the 2% digital service tax on US technology companies in Great Britain. In return, the United States may ease collective bargaining burdens in Great Britain and may reduce or eliminate the country’s 25% tariffs on aluminum, steel, and cars.
Challenges Ahead
For weeks, Trump officials have said that they are talking to more than a dozen countries and approaching a deal, but so far, nobody has been announced. Trump has often said that he has no hurry to sign a deal, and claims that the federal states have been "tearing down" America for years, and the high tariffs that the United States have imposed will help to compensate for trading.
Long-term Impact
Despite the administration’s rhetoric that it lies in advanced trade negotiations with more than a dozen countries, actual trade agreements often take years to endure. They include incredibly complex agreements that deal with the minutia of different goods and non-tariff obstacles. They often contain considerable political considerations because different parties try to protect voters with special interests.
Memorandum of Understanding
Instead, the "deal" that Trump teased is more of a memorandum of understanding. This can lead to lower tariffs for the goods of a certain country at short notice, but they will do little, which corresponds to a considerable economic victory for some time. And that’s just one agreement. The "mutual" tariffs that came into force on April 7 and were 90 days during the break for 90 days affects dozens of countries.
Trade War Thaw
Trump’s announcement of a trade agreement is the second significant sign this week that the administration may be open to negotiations that would ultimately reduce some tariffs for foreign nations. On Tuesday, the finance minister said that he and the US trade representative will travel to Geneva, Switzerland, where they will meet their Chinese colleagues.
Global Impact
The economies have already been damaged by the punishing tariffs around the world – especially the Americas. The US economy went into contraction in the first quarter, the first contraction in three years, in anticipation of the "liberation day" tariffs started in the second quarter. Although the China-US-trade patient situation is by far the most aggressive, Trump has also imposed large tariffs on most other countries around the world.
Conclusion
The world will watch the announcement and the US-China talks with anticipation. The chairman of the Federal Reserve said on Wednesday that the tariffs could cause serious damage to the American economy. However, he said that the trade talks that the United States organizes with abroad could prevent the worst-case scenario. Global economists have all predicted that Trump’s trade war would have catastrophic effects on the global economy.
