LONDON, Nov 28 - The United Kingdom is strategizing to persuade Donald Trump that its services-oriented trade with the United States should be exempt from proposed tariffs as it cautiously mends relations with the European Union and strengthens ties with China.
Trump has indicated plans to impose blanket tariffs ranging from 10% to 20% on nearly all imports upon his anticipated return to the White House in January. This week, he also promised significant tariffs on Canada, Mexico, and China.
For the UK, which relies heavily on trade, such tariff threats could hinder the government's aspirations for economic growth, a priority for the Labour administration that took office in July.
Following Brexit, which complicated its relationship with the EU, the UK aims to solidify its partnership with the U.S., accounting for about 20% of its total trade. While Trump focuses on countries where the U.S. has trade deficits, both the UK and the U.S. report trade surpluses with one another due to differing statistical methodologies.
Over two-thirds of UK exports to the U.S. consist of services rather than goods, making the situation more complex. Business and Trade Secretary Jonathan Reynolds stated that the UK would advocate for open and fair trading relationships with the Trump administration, asserting that criticisms aimed at other European nations do not apply to the UK.
The UK is pursuing a 'reset' in its relationship with the EU, seeking to negotiate a new veterinary agreement to ease border checks, although it has ruled out rejoining the EU's single market or customs union.
Liam Byrne, chair of the business and trade committee, noted that while closer ties with the EU may complicate a comprehensive Free Trade Agreement with the U.S., it could yield quicker benefits for the UK economy.
Recent government statistics indicate that over 40% of British exports are directed to the EU, compared to 22% to the U.S. Both London and Brussels have acknowledged the challenges ahead, with the EU pushing for discussions on youth mobility.
Reynolds pointed to comparable agricultural standards as a basis for achieving agreements to reduce checks on agricultural products, but he acknowledged the significant challenges posed by a free trade agreement with the U.S., particularly regarding agricultural standards.
George Riddell from EY UK expressed concerns that any non-tariff restrictions imposed by the U.S. on services could create uncertainty for businesses, while goods exporters may face a new tariff regime upon shipment.
In addition to strengthening EU ties, the UK is signaling a willingness to engage with China, despite Trump's tariff threats. Prime Minister Keir Starmer recently held talks with President Xi Jinping at the G20, marking the first leader-level discussions since 2018.
Experts suggest that the UK may have to navigate its relationships carefully, balancing competing interests from the U.S. and China. Byrne mentioned the potential for 'guard rails' on trade with China to safeguard economic security and U.S. interests.
However, trade consultant Sam Lowe cautioned that the UK's engagement with China could provoke a stronger reaction from Trump than its dealings with the EU.