As the UK suspends tariffs on the US, are there signs of a deal?

U.K. to Suspend Tariffs on U.S. Goods in Bid for Trade Deal

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The U.K. will suspend tariffs imposed on the United States over subsidies for aerospace firms, in a bid to broker a post-Brexit deal with Washington.

There has been a long trade battle between the E.U. and the U.S. over state-subsidized funding for aircraft manufacturers; the American company Boeing and European rival Airbus. The fight pre-dates the outgoing U.S. President Trump’s administration but escalated in November when the E.U. placed tariffs on $4bn of U.S. goods in retaliation for illegal state aid granted to Boeing.

The tariffs will be dropped in the U.K. from January 1 after the transition period ends and Britain exits the E.U. trading bloc’s regulations. This signals Britain’s attempt to foster closer relationships with the U.S. and President-elect Joe Biden.

“Ultimately, we want to de-escalate the conflict and come to a negotiated settlement so we can deepen our trading relationship with the U.S. and draw a line under all this,” International Trade Secretary Liz Truss said in a statement.

In October 2019, the United States imposed tariffs on $7.5bn worth of E.U. goods, resulting from the 15-year row over subsidies paid by the E.U. to Airbus. This made many Europe-made goods more expensive in the U.S. after they were hit with a 25% tariff.

In its response to the action then, the E.U. had said it had no choice than to respond with its own tariffs on U.S. goods, leading to the current tit-for-tat row.

The tariffs will be dropped in the U.K. from January 1…[which]signals Britain’s attempt to foster closer relationships with the U.S. and President-elect Joe Biden

Although the U.K. formally left the E.U. in January, it joined the E.U. in imposing the tariffs on $4bn of U.S. goods in November. Also, in January, the then Business Secretary, Andrea Leadsom told an Airbus audience that it would continue to support E.U. to negotiate a settlement over the row.

This made the timing of Britain’s decision to drop the tariffs pointing to a political carrot to persuade the U.S. to reach a settlement, though with a caveat that it could re-impose them “if satisfactory progress towards an agreeable settlement is not made”.

However, the ADS Group, which represents the U.K. aerospace industry, has expressed disappointment over the U.K.’s decision to take make such a move “without securing some reciprocal action to resolve this dispute”.

Airbus A380 plane [Image: G-R Mottez, Unsplash]

A spokesperson for the group said: ‘A negotiated settlement is the best way to achieve a lasting resolution and Governments in the U.K., Europe and the U.S. must work together to reach this goal’.

Furthermore, Airbus has also said it would continue to seek a negotiated settlement of the dispute to avoid ‘lose-lose tariffs’.

In addition, other products such as Scotch whiskey were notably affected by the long-standing Airbus-Boeing row.

The Scotch Whisky Association’s chief executive Karen Betts welcomed the U.K. government’s decision, calling it ‘an encouraging step’. She viewed the move as the ‘determination to de-escalate the damaging transatlantic trade disputes that have seen Scotch whisky exports to the U.S. fall by over 30% in the past year’.

A spokesperson for the group said: ‘A negotiated settlement is the best way to achieve a lasting resolution [for] Governments in the U.K., Europe and the U.S.’

Betts called on the U.S. government to reciprocate by dropping the tariffs on U.K. goods affected by the dispute, to allow the concerned industries in the U.K. and U.S. to trade freely once again.

A trade agreement with the U.S. will be one of the major deals Downing Street aims to seal in a bid to mitigate the impact of its possible no-deal exit from the E.U. trading bloc.

However, while the Trump administration has considered the U.K. as “first in line” for a deal after the transition, it remains to be seen what the foreign policy of the incoming Biden presidency will be towards Britain.[Header image: John Cameron, Unsplash]