The so-called US-UK Economic Prosperity Deal falls short of an actual trade agreement and does not offer tariff exemptions, but could serve as a model for how countries engage with President Donald Trump’s trade strategy, experts say.
The US and UK governments announced on May 8 what they framed as a major step forward in bilateral trade: the Economic Prosperity Deal (EPD), described in official documentation as “the first of its kind”.
In reality, it’s a non-binding memorandum of understanding with limited specifics – and no exemption from the sweeping 10% tariff on imports the US imposed on all trading partners on April 2’s ‘Liberation Day’ .
The document outlining the general terms of the EPD emphasises that it is not legally binding and serves as a starting point for future discussion. Many experts expect this kind of short-form non-binding agreement to be the new normal for countries negotiating with the US during Trump’s second term.
Speaking at the Baft (Bankers Association for Finance and Trade) Global Annual Meeting on May 5 – just days before the EPD was announced – Shawn Golhar, global head of policy advisory banking at Barclays, said he expects to see a series of these arrangements from the administration.
“I think we’re going to see a lot of trade deals [with the US],” he said. “These are not going to be free trade agreements. These are going to be effectively term sheets or MOUs.”
The EPD makes some concrete proposals, including the UK’s removal of tariffs on US beef and ethanol imports, and a US quota charging a reduced 10% tariff on 100,000 British cars.
For UK-US steel and aluminium trade, a flashpoint in the early weeks of Trump’s presidency, the EPD says the UK will “work to promptly meet US requirements on the security of the supply chains of steel and aluminium products intended for export to the United States”, after which the US will offer the UK a most favoured nation rate quota for imports.
Pharmaceuticals, the UK’s second-largest goods export to the US by value after automobiles, and the US’ fourth-largest export to the UK, may be subject to similar tariff reductions if conditions are met.
Although brief, the document also contains a section on digital trade, which has been a major focus for the private and public sector in recent years.
Both countries will “negotiate provisions on paperless trade, pre-arrival processing, and digitalised procedures for the movement of goods between our countries”, according to the agreement.
Another area of interest for trade financiers is a brief section in the document’s economic security section, in which both countries pledge to combat schemes that use transshipment to evade tariffs, antidumping laws or other safeguards.
The Trump administration is keen to crack down on countries – particularly China – shipping goods via third countries to evade tariffs.
Reuters reported on April 22 that Vietnam was working to clamp down on the country being used as a transshipment hub for Chinese exports to the US, with the Vietnamese government keen to avoid the introduction of a 46% tariff once the 90-day pause ends in July.
The agreement does not address services trade, even though flows are larger than for goods in both directions.
Simon Gleeson, head of the US corporate desk at business advisory firm Blick Rothenberg, says this shows how “narrow” the deal’s focus has been.
“The full and comprehensive agreement […] appears more like a statement of intent and tariff mitigation rather than the much longed-for signed declaration that would have needed to be approved by US Congress,” he says.
“Whether it is enough to reduce the damage that has been done and clear the clouds overshadowing strong-performing UK sectors like services is yet to be seen.”
It has also been panned by pro-EU group Best for Britain.
Its chief executive, Naomi Smith, says in a statement that the deal is “chaotic and lacking detail”, and that it “neatly demonstrates why trade with Trump’s erratic and unpredictable administration should be treated with extreme caution”.
The US has also made headway with China, announcing on May 12 a mutual 115% reduction in tariffs, lasting for 90 days.
The White House announcement also says that the two countries have agreed to “establish a mechanism to continue important discussions about trade and economics”.
