Bailey: Benefits of UK-US trade deal will depend on other agreements
Bank of England Governor Andrew Bailey has heralded the trade deal struck between the UK and US as “good news”, but cautioned that the UK’s economic prospects will still depend on agreements the US reaches with other trading partners.
Speaking at an event in Reykjavik, Bailey welcomed the partnership announced by Donald Trump and Keir Starmer on Thursday, which lowered trade barriers on goods like steel, cars and agricultural produce.
But the central banking chief dampened his praise for the bilateral deal by adding that obstacles to free trade between the UK and US remained higher now than before Trump’s inauguration in January.
“It’s good news,” the central banking chief said. “[But] I have to say it’s good news in a world where it will leave the effective tariff rate higher than it was before all this started. I do think we have to bear that in mind.”
Bailey made his comments just a day after initial details of the deal – the first any country has agreed with the US since Trump’s so-called ‘Liberation Day on 2 April – were published. On the same day, the BoE’s Monetary Policy Committee also voted to cut the Bank Rate by 25 basis points.
Alongside the rate decision, the BoE unveiled fresh estimates indicating that – as of 29 April – Trump’s tariff regime would constitute a 0.3 per cent hit to the UK economy over three years.
Officials attributed roughly two thirds of that downgrade to the indirect impact of America’s tariffs on other countries, and the slowing effect the increased trade friction will have on the global economy.
Answering questions after delivering a speech on ‘monetary policy in uncertain times’, Bailey re-emphasised the benefit that other post-Liberation Day deals would bring. “The impact of all these developments on the trade front on the UK outlook, is conditional therefore not only on the UK trade agreement, but also what the rest of the world agrees as well,” he said.
Under Starmer and Trump’s deal, tariffs on the UK’s steel and aluminium exports will fall to zero from the 25 per cent rate they at which they’ve been levied since March. Car exports from the UK to the US – the sector’s biggest export market – were also cut to 10 per cent, having been levied at 27.5 per cent since April, for the first 100,000 vehicles entering the US.
Aeroplane engines can also now enter the US tariff free, and trade barriers were also reduced on agricultural products, including bioethanol and beef.
Bailey’s assessment on the UK-US deal come after he used a previous interview to emphasise the importance of improving economic ties with Europe as well.
Speaking in an interview with the BBC in the aftermath of the BoE’s rate decision on Thursday, he said: “It would be beneficial – having a more open economy to trade with the European Union. Because there has been a fall-off in goods trade with the EU over recent years.”
“It is important we do everything we can to ensure that whatever decisions are taken on the Brexit front do not damage the long-term trade position. So I hope that we can use this to start to rebuild that relationship,” the rate-setter added.