US Trade Policy and British Industry
The question of whether the British industry is exposed to paralyzing tariffs on exports to the USA or a unique opportunity to grow back can be determined by three words: "melted and cast".
Current State of US Trade Policy
Donald Trump has just doubled the additional tariffs charged for imports of steel and aluminum to the USA from 25% to 50%. This would transform a painfully high tariff into an almost unmistakable economic wall. However, the good news for British steel producers is that they are spared the 50% tariff and only have to pay the 25% tariff, at least initially.
Temporary Reprieve for British Steel Producers
This temporary reprieve only lasts until July 9th, based on President Trump’s recent explanations. The intention to give up the higher tariff is conditional, and British steel producers are not entirely out of the woods yet.
The Trade Agreement
The trade agreement between the UK and the USA aims to enable some cars, pharmaceuticals, and steel and aluminum to enter the USA with a tariff rate of 0%. However, the agreement is still in the negotiation phase, and the small print has to be completed.
Details of the Trade Agreement
When it comes to cars, there are nuances about which type of car the deal covers. The same applies to medicines. Things become even more complex when drilling into the details on steel. The White House is nervous about the view that Britain could become a kind of assembly point for steel from other countries around the world.
"Melted and Cast" Steel
The US negotiators exist that only steel, which is "melted and cast" in the UK, is covered by the trade agreement. This is okay for some producers, but not for others. One of the largest steel exporters in the UK, Tata Steel, produces a lot of steel that is transformed into tin cans found in American supermarket shelves.
Complexity of Steel Production
Tata Steel closed its blast furnaces last year and intends to replace them with cleaner electrical arc stoves. In the meantime, it imports raw steel from the Netherlands and India instead and then leads it through its mills. This complexity adds to the challenges of negotiating the trade agreement.
Negotiation Challenges
The negotiations are taking longer than expected due to the complexity of the issues involved. The White House is sensitive to the fact that some steel produced in the UK could be considered as benefiting China, which adds to the challenges.
Deadline for Negotiations
The White House has pointed out that the UK is only spared the higher tariff provided that the trade agreement has been concluded by July 9. This gives the negotiators another month and a bit, which may sound like a lot, but it would be one of the fastest announcement rates for negotiations in modern history.
Conclusion
There is no guarantee that the UK will complete the deal on time, although insiders believe that they could be able to end it piece by piece. The heat is switched on, and just when the UK thought it was in the safe zone, it is on the verge of danger again.
