And, second, hundreds of product categories containing steel and aluminum are going to have to identify the value of the metal in their products and pay a 25% duty on this part of the total value. This will add considerably to the financial and administrative cost of exporting goods from the UK to the USA and the reaction of Graeme MacDonald, CEO of JCB was unsurprising. 

Trying to assess how well the UK has done in its negotiations is equally difficult. Bluntly put, most UK exporters are now paying an additional 10% on top of previous WTO tariff rates and those with steel and aluminum in their products, an additional 25%. By comparison, the EU has a baseline 15% tariff on its exporters (and 50% on steel), but this is inclusive of the WTO tariffs, so if there is a Brexit advantage, it is modest. 

Listening to our members, we would argue that the UK has probably got as good an outcome as it could have hoped for in the face of a clear and radical change in US economic policy; there was certainly no appetite from our members for retaliation by the UK and very little chance of success if that had been the route chosen. 

The EPD contemplates a lot more besides the tariff issues that make the headlines; there is some improved mutual market access for agricultural products (which we would like to see extended), the elimination of tariffs on aerospace products and a commitment to continue negotiating on digital trade, economic security and supply chain issues. The pharmaceutical sector is singled out for special mention and alarm bells should be sounding in the UK about the implications of what might be coming for this industry. There are also clear signs from the USA that the administration remains deeply unhappy about what they see as targeted taxes and regulations aimed at their champion digital platform companies. 

The White House has talked about multiple objectives for its policy, including to reduce its trade deficit, to raise a new source of revenue, to reduce barriers to its exporters, to reduce reliance on overseas suppliers for critical goods like steel, chips and medicines, but, above all, it emphasizes that companies wishing to sell to the US should locate their production in the US.

Much of the commentary has focused on the unilateral nature of the action taken and complained about the disregard for the ‘rules based’ trading system as enshrined in the WTO. The problem with this view is that the WTO did nothing to alleviate US concerns, shared largely by both political parties, that they were locked into low tariff rates, with no prospect of change leading to trade deficits, often with countries with higher tariffs and very significant real or perceived non-tariff barriers to US exports. The US, naturally suspicious of supra national institutions already, decided it had had enough. 

The question of whether the policy is working, against any or all of the objectives listed earlier, will take time to be answered. The big increase in inflation that most economists predicted has not happened, at least not yet, but there are some concerning signs in sectors heavily dependent on imported components. Income from tariffs is certainly real with estimates of up to $300bn per year although the data about who is actually paying these costs are murky at best.  

There is evidence that the objective of increased investment by companies into the US may be happening, with a long list of companies announcing their intention to make increased commitments. The White House keeps a rolling list of these commitments on its website and, whilst we know that promised dollars are not the same as actual dollars, and it is too early for the official data to reflect any of this, anecdotally, we hear from multiple sources, that this is a real trend. 

How all of this ends up and its impact on our member companies will form part of a busy convening program that the BAB team has lined up for the autumn. Starting on September 8th with the publication of the results of our annual signature research study, the BAB and Bain & Company Transatlantic Confidence Index, we have a wide range of opportunities for every member to get involved. You can see a current list of upcoming events on our website here. Our teams in London, New York and DC are here to help you to get the most from your membership so please get in touch if you have questions or ideas. We would love to hear from you.