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Life after the elections: quick deal, no deal or a small deal – U.K.-U.S. relations

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Life after the elections: quick deal, no deal or a small deal – U.K.-U.S. relations

This article is reprinted from Panjiva, part of S&P Global Market Intelligence

Trade negotiations between the U.K. and U.S. had made significant progress under the Trump administration, including completion of “much of the legal text” according to HM Trade Secretary Liz Truss. 

Continued progress under the Biden administration looks unlikely in the near term. One reason is that the Biden transition team has made it clear that domestic employment policy will likely take priority, as outlined in Panjiva’s research of Sept. 30.

Another is that President-elect Biden’s first call with Prime Minister Johnson included the statement that Biden “reaffirmed his support for the Good Friday Agreement in Northern Ireland“. 

That’s likely to be an oblique reference to the Johnson administration’s plans to pass the Internal Markets Bill (IMB), recently blocked by the House of Lords, to adapt the existing treaty agreements with the EU regarding border controls between Northern Ireland and the Republic of Ireland. Johnson is committed “to retable these clauses when the bill returns to the Commons“, the Financial Times reports, suggesting the IMB may become a running sore for U.S.-U.K. negotiations.

It’s also worth remembering that President Obama had previously stated that Brexit would mean that the U.K. “is going to be in the back of the queue” for a trade deal, the BBC reported in April 2016. While hardly binding on President-elect Biden it is a useful reminder of the U.K.’s scale in global trade.

Put simply, unless the U.K. government can complete negotiations with the U.S. by the end of the year and the Trump administration can get Congressional approval then a deal is unlikely for the foreseeable future.

U.K. exports to the U.S. have slowed in Q3’20 having previously led the expansion. In 2019, exports to the U.S. increased by 18.2% year over year, Panjiva’s analysis of official data shows, while total exports increased by just 6.3%. By September 2020 there was a 26.8% slide in exports whereas total U.K. exports dipped by 8.8%.

U.S. export growth driver has evaporated

That’s not to say that there aren’t smaller deals to be done to improve trade relations between the two countries, particularly in terms of unpicking actions by the Trump administration. A removal of tit-for-tat tariffs in the aerospace industry would be particularly useful and could come against the backdrop of a wider rapprochement with the EU

Panjiva’s data shows that U.S. imports of aerospace products from the U.K. have dropped by 14.0% year over year in the 12 months to Sept. 30 to reach $2.02 billion. The aerospace industry faces challenges beyond tariffs of course, with COVID-19 related travel restrictions cutting total U.S. imports of aerospace products fell by 12.8%, with imports from the EU only having declined by 1.3%.

Tariffs, pandemic power descent in aerospace imports

The tariffs applied by the Trump administration cover a wide range of British products, in particular including luxury goods such as whiskey which accounted for 76.9% of the products targeted for tariffs by value in 2019. U.S. imports of whisky from the U.K. dropped by 33.8% year over year in the 12 months to Sept. 30.

Panjiva’s U.S. seaborne import data shows that downturn has likely continued recently with total shipments down by 16.6% in October after a 16.1% slide in Q3. Diageo and Bacardi have done worse than average with declines of 34.0% and 27.5% respectively in October while shipments linked to Pernod Ricard have surged 42.3% on improved sales of its Glenlivet brand.

Diageo, Bacardi feel ill-effects of tariffs