TRQ for UK Cars Will Be 10% 'All-In'; USTR: Deal a Framework for Others

The non-legally-binding Agreement in Principle document released the evening of May 8 says: "The United States will create a quota of 100,000 vehicles for UK automotive imports at a 10 percent tariff rate, and an accompanying arrangement for attendant auto parts for such autos."

According to the U.K. government, the country exported 102,000 cars to the U.S. last year, so this covers almost all the current exports. The country exports Mini Coopers, Bentleys, Rolls-Royces, Aston Martins, and McLarens.

This will give British-manufactured cars a leg up on cars manufactured anywhere else outside the U.S., including vehicles built in Mexico and Canada, which had enjoyed duty-free access for decades but now face 25% tariffs.

The American Automotive Policy Council, which represents Detroit's Big Three automakers, issued a statement criticizing the decision. The group's president, Matt Blunt, said, "Under this deal, it will now be cheaper to import a UK vehicle with very little U.S. content than a USMCA compliant vehicle from Mexico or Canada that is half American parts. This hurts American automakers, suppliers, and auto workers. We hope this preferential access for UK vehicles over North American ones does not set a precedent for future negotiations with Asian and European competitors."

Trump said he would not consider a similar deal for mass-market automakers, saying those companies should build their cars in the U.S. (Mini is a mass-market brand, however.)

On trade in steel and aluminum, the Agreement in Principle says, "The United Kingdom will work to promptly meet U.S. requirements on the security of the supply chains of steel and aluminum products intended for export to the United States and on the nature of ownership of relevant production facilities. Understanding the United Kingdom will meet these requirements, the United States will promptly construct a quota at most favored nation (MFN) rates for UK steel and aluminum and certain derivative steel and aluminum products."

The Coalition for a Prosperous America complained about this concession.

"MFN rates on steel and aluminum are effectively zero; and indeed, the UK government is announcing that U.S. tariffs on steel will be 'reduced to zero.' While a return to effectively duty-free quota has been signaled, there is no indication as to the volume. What has been conveyed, however, is that more indeterminate quotas should be expected pending new deal announcements. Businesses cannot invest in this environment. If quota is to be made available for imports subject to Section 232 actions, the Administration should do so all at once as soon as possible," the group wrote.

"This new uncertainty adds to the fact that the Administration’s choice of 25% offers very limited protective effect for most steel fabricated articles. This is irrefutable from import data on countries that have been subject to the 25% steel duty since 2018. And regrettably, for steel derivative items outside Chapter 73 of the Harmonized Tariff Schedule (HTS), the 25% applies only against what the importer states its foreign vendor alleges to have paid for the foreign steel. There is no producer in America who believes this formula will provide any meaningful protection."

The group said all quotas should be CBP-administered, rather than the voluntary monitoring approach taken when the 25% tariffs on steel and 10% tariffs on aluminum were lifted for Canada and Mexico in 2019.

On the aluminum TRQ, the Aluminum Association said that while "there is a negligible amount of aluminum traded between the U.S. and UK, this news bears watching as it could establish a framework for how aluminum is addressed in future trade deals."

On television, USTR Jamieson Greer said: "This certainly is the framework. I tell them this. We need to talk about tariffs, non-tariff barriers, economic security." He added, "Other countries should look to this as a model." He was not talking specifically about steel and aluminum, rather, the ways that the U.K. agreed to lower tariffs and non-tariff barriers and align with the U.S.

The reporter asked Greer if he's confident that trade deals can be reached ahead of the July 8 implementation date, when much higher reciprocal tariff rates have been established for some Asian countries.

Greer said there would be some more deals before then, but maybe not for all countries.

"Vietnam, other southeast Asian countries, they're in, they're talking to us, They're being very forward-leaning. We're having fruitful talks with Vietnam and others, and they understand what we're trying to solve for."

While most of the USTR's press release was upbeat, it also said: "The United States is disappointed that the UK was unwilling to agree to fully address its discriminatory Digital Services Tax (DST). It is discriminatory, unjustified, and should be removed promptly."

House Ways and Means Chairman Jason Smith, R-Mo., also noted the DST is unfinished business. "I look forward to continued partnership with the Trump Administration to finalize all the details of this important agreement while addressing other significant challenges in our bilateral relationship with the UK, including those related to digital trade and tax," he said in a statement released May 9.

The Agreement in Principle said the current TRQ of 1,000 metric tons at 20% for beef not treated with hormone additives will increase to 13,000 metric tons, and will have a zero tariff within quota. It also said the U.K. will offer a duty-free TRQ of 1.4 billion liters for U.S. ethanol.

Noting those concessions, and what he called "additional opening of the UK market to U.S. agriculture," he said, "This agreement is a major win for our nation’s farmers and ranchers."

The Agreement in Principle does not list any other TRQs, duty reductions, or policy changes on sanitary or phytosanitary rules that the U.S. says limit its agricultural access.

However, it says: "The United Kingdom and the United States plan to work constructively in an effort to enhance agricultural market access. Further, both countries positively support future discussions to strengthen bilateral agricultural trade. The United Kingdom and the United States affirm that imported food and agricultural goods must comply with the importing country’s sanitary and phytosanitary (SPS) standards and other mutually agreed standards. The United Kingdom and the United States commit to working together to improve market access for agricultural products, to highlight concerns, and to increase agricultural cooperation on areas such as certain export verification programs to facilitate greater trade, and more formal bilateral engagement through international standard setting bodies."

It also says: "Following a reasonable period of negotiation: (i) the United Kingdom intends to reduce its applied tariff rates on a preferential basis on a range of originating goods of the United States in sectors of importance to the United States; and (ii) the United States intends to reduce its applied tariff rates on a preferential basis on a range of originating goods of the United Kingdom in sectors of importance to the United Kingdom. The countries intend to coordinate the timing of their respective tariff reductions to be as soon as practicable, taking into consideration their respective domestic processes. On request of the United Kingdom, the United States will consider reducing its applied tariff rates for a UK territory or territories for whose international relations the United Kingdom is responsible on a preferential basis."

The U.S. says if the U.K. complies with supply chain security requirements in pharmaceuticals and pharmaceutical ingredients, "the United States and the United Kingdom intend to promptly negotiate significantly preferential treatment outcomes on pharmaceuticals and pharmaceutical ingredients," if the Section 232 investigation on pharmaceuticals hikes tariffs on those categories.

On trade facilitation, the agreement says: "Both countries confirm that they will negotiate provisions on paperless trade, pre-arrival processing, and digitalized procedures for the movement of goods between our countries."