US Tariff Suspension to Aid Growth, Tail-Off Trade Disputes

Written by Kunal Sawhney, CEO, Kalkine Group

The Downing Street administration is seemingly working to de-escalate the international trade scuffle as the UK proceeds ahead to amplify the cross-border trade with major nations in the post-Brexit era. After clinching a zero tariff, zero quote trade arrangement with the European Union, the UK government has managed to resolve the longstanding trade conflicts with the United States over the aerospace tariffs, reaching a conclusive joint approach.

Earlier this month itself, the Joe Biden administration decided to temporarily suspend all the retaliatory trade tariffs on the direct exports from various jurisdictions of the UK to the US. The provisional termination of the trade tariffs has been primarily done to de-escalate the trade tensions, alongside paving the way to reach a negotiated solution to the 16-year-old subsidy dispute between the EU and the US.

In 2006, the US and the EU had a dispute on subsidies received by the Chicago-headquartered aerospace conglomerate Boeing Co and the Netherlands-based Airbus SE, which is jointly controlled by Britain, France, Germany, and Spain.

Tariff suspension

The newly orchestrated arrangement between the UK and the US has come into effect from 8 March. The momentary moratorium of trade tariffs is highly likely to reinforce the volume of exports from the UK, at a time when the Downing Street administration is eagerly looking forward to normalizing the balance of trade after the termination of Brexit transition period.

The Office for National Statistics is slated to release the balance of trade figures for the month of January 2021 on Friday, 12 March. The trade deficit of the UK stands at more than £6.2 billion as of December 2020, dropping modestly from £6.6 billion in November. Of late, the trade deficit multiplied sharply after August 2020, as the country started to reimpose restrictions to curb the spread of coronavirus.

Britain has mostly been a trade deficit country, especially in the last two decades. The UK recognized a two-decade high trade deficit of more than £8.7 billion in February 2019. However, the UK recorded a balance of trade surplus of £7.6 billion in November 2019 and a three successive surplus for three months in a row during the April-June quarter of 2020, the lockdown period.

The recently agreed trading arrangement with the US is likely to narrow the ‘balance of trade’ deficit in the upcoming quarters as countries begin to restart the international trade on a full-fledged scale, following the path of economic recovery.

As per PM Boris Johnson, multiple businesses across the UK from Scotch Whisky distillers to Stilton-makers are likely to benefit from the tariff suspension. The tariff lift off is highly likely to aid growth to the businesses which are largely dependent on the exports with the United States being the largest trade partner, as a single country, to the UK.

The temporary termination of the trade tariffs is expected to bolster the exports and boost the domestic employment framework, mainly in the industries that have encountered a grave situation due to the unfair trade practices. Scotch Whisky, being the largest food and drink export in the calendar year 2020, is likely to gain in a substantial manner as exports of Scotch and single malt Irish whiskies stood near £340m as in 2018.

The next move 

The Downing Street administration is likely to engage with the US counterpart in reaching a fair settlement to the long-running dispute to permanently abolish the punitive tariffs, effectively catalyzing the cross-border trading activity, mainly the exports from the UK. As per the government, the fresh trade arrangement would benefit the aerospace industry in the UK, strengthening the employment prospects of the people working with the sector across Belfast, Wales, and Sheffield.

Nonetheless, the trade tariff suspension is temporary. Therefore, the tariffs can be re-imposed at any point in time, at the sole discretion of the government if it does not realize material progress in the trading activity. Additionally, the UK and US authorities are evaluating a prospective trade deal under which the exports from the UK can enjoy a hefty removal of trade tariffs.

According to some details of the apparent trade deal, the UK will be able to eliminate trade tariffs to the tune of £500 million on various goods that are being exported from the UK to the US.

About Lisa Baker, Editor 2419 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.