16.05.2025 – Special Relationship Shaken, Not Stirred
Special Relationship Shaken, Not Stirred
At the beginning of April on ‘Liberation Day’, Trump announced widespread tariffs with the UK faring relatively well compared to the more punitive tariffs on other nations. As expected, we’ve seen a swift scramble to make trade deals with the US, and the UK has managed to reach the front of the queue. But is the new trade deal particularly meaty or a cheap political win?
Sifting through the rose-tinted, political brown-nosing between Trump and Starmer, the main headline is that 10% tariffs on imports from the UK are here to stay. It feels as though the UK negotiators haven’t put up too much of a fight, given that the hand they were initially dealt wasn’t too bad compared to the rest of the world – although clearly it would be deeply unpopular to say this publicly. The finer details are yet to be ironed out but as at the time of writing, the trade deal primarily focuses on agriculture, steel and automobiles.

Trump claims ‘the best beef in the world’ will be making its way to British shelves (I think the Japanese and Argentinians might have something to say about that), with Rolls Royce aircraft engines as well as UK manufactured cars heading the other way, still subject to a 10% tariff, albeit significantly less than the 25% minimum currently imposed on other nations. Post announcement both leaders were questioned about industries not covered by the deal such as media. Trump’s response was that “James Bond has nothing to worry about”, I’m not sure what that really means but it’s fair to say that the US-UK trade dialogue may well continue.

Despite this being dressed up as positive news, tariffs are still higher than they were at the start of the Trump presidency which will lead to rising costs and create a headwind for global growth. The positive news to be had is that whilst no other US trade deals have been announced yet, the UK looks set to be more favourably treated than many other nations and jobs at British steel and UK based auto manufacturers look much safer than only last week.
Perhaps most importantly, the deal comes at a time where both political leaders are looking to halt the decline in their approval ratings. For Trump in particular, many of his supporters associate him with a strong economy and his promises to bring down inflation. Approval ratings and polls would suggest that voters are losing patience with both of these subjects but with midterm elections coming around next year, it’s probable that Trump’s actions are going to have to refocus on pleasing the electorate in order to appease his Republican colleagues.
For now, we remain very cautious about the outlook for the US. We are likely to maintain our underweight position given the destructive effects of tariffs are not yet showing in the hard economic data points. Elevated levels of volatility are expected to continue given there are many trade deals yet to be discussed, and it is reasonable to expect that not all negotiations will go swimmingly and possibly not before the end of the 90-day tariff pause in July. Despite these ongoings, the team are alert to the prospect of US policy swiftly turning positive in the second half of this year given the midterm elections next year and we may well take advantage of extreme volatility to reduce our underweight position.
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