Impact of New Governments on UK-US Trade: A Deep Dive

The UK and USA have long shared a ‘special relationship’. One underlined by huge cultural similarities, an unwavering geopolitical alliance and strong trade links, valued at £304.3 billion in the year to July 2024. Put simply, USA is the UK’s single biggest trading partner and strategic ally.

However, 2024 has seen general elections in both countries which have delivered new governments.

Consequently, businesses on either side of the Atlantic are bracing for potential shifts in policy that could change this dynamic. Rightly so. The incoming administration in the USA has been particularly vocal on plans for international trade.

For industry professionals, understanding potential changes is critical.

This article will dive into the implications of new governments on trade relations between the UK and USA. From changes to tariff rates and regulation, to key industries likely to see the greatest impact, we’ll analyse how the next years could play out.

“The UK-USA trading relationship is crucial for many businesses exporting from the UK and Europe. Staying informed on potential changes to that relationship can help to minimise the risk they pose.”

Liam Launders, Head of Sales, WTA

Incoming USA tariffs on imports

The incoming Trump Administration is widely expected to implement up to 20% tariffs on all imports into the USA, as was widely spoken about in the campaign. If implemented, this has been estimated to cause a £22bn hit to UK exports.

There’s currently no indication that the UK’s strong relationship with the US would mean businesses are exempt from such tariffs. The US is pursuing a unilateral protectionist agenda, regardless of place of origin.

Consequently, UK goods would become less competitive on the US market compared to locally sourced items. However, as these tariffs would be imposed on global imports, the UK would not lose ground on other competing nations.

In fact, they would become more competitive against Chinese goods. The USA began a trade war with China during the last Trump Administration and have suggested 60% tariffs on all goods from the Asian nation this time around.

If that was to go ahead, it would likely create a dramatic shifting of US supply chains away from China, potentially to the advantage of UK businesses. There are some analysts who suggest in this scenario, European exports to China would increase.

No prospect of a UK/USA trade deal

By extension of the first point, there remains no prospect of a UK/USA free trade deal.

Negotiations over a deal have stalled since the Biden Administration began in 2021, where focus moved to the domestic economy. It’s fully expected, with the changing UK and US governments, this will not change.

The US is placing huge emphasis on domestic production at the expense of all external partners.

The UK, however, has been pursuing state-level Memorandum of Understanding agreements since 2022. Aimed at bolstering trade links and enhancing relationships, these agreements are in place of a free trade deal.

It must be noted though, that these agreements will not bypass any tariffs and are not legally binding. But some individual states, are huge markets on their own, so these deals aren’t to be dismissed. In 2022, Texas had a GDP of £1.9 trillion all on its own.

Source: UK Govt

It’s widely expected that the new UK government will continue pursuing Memorandum’s of Understanding with more states. Those believed to be in negotiations at the time of the UK election were California, Colorado, Illinois and New York. But with now a new USA Administration it’s unknown whether negotiations are continuing.

Asian manufactured goods the primary target for the USA tariffs

It’s an open secret that the primary target of these tariffs is Chinese goods, hence why they look set to have even more aggressive duty rates applied. The USA imports huge quantities of furniture, bedding, lamps, toys, games, sports equipment, paint, and other miscellaneous items from China.

Desire is to return more manufacturing jobs to the USA. Although it’s difficult to imagine a scenario where the USA could manufacture those goods competitively compared to an Asian nation.

A more likely scenario seems a restructuring of supply chains away from China, but to other nations in the region.

"We have seen in increased adoption of the China Plus One supply chain strategy in recent years. Where companies have looked to source goods from another nation alongside China to increase resilience. Those who adopted that strategy may be better placed to deal with any tariffs, if they indeed arrive."

John Sommer, Co-CEO, WTA

Areas of concern from a European business perspective is areas of manufacture where the US is already strong. European goods are being made less competitive by 20% tariffs, meaning local rivals look set to gain.

Could we see tariff exemptions for food and drink?

The food and drink sector is more uniquely positioned than others, and could be subject to exemptions on any new tariff rates imposed by the US.

Currently, the US imports nearly a fifth of its food. Added to that survey’s such suggest 28% of US adults report difficulty affording food and you can see a problem. Any policy which threatens to raise food and drink prices, or worse, cause shortages, will be extremely unpopular.

Consequently, we could see food and drink products given a more favourable phased implementation of tax rates or omitted completely.

Looking at Brexit gives us greater insight here too. The UK delayed implementation of import controls on food from the EU seven times. This was widely believed to be because of concerns over prices and shortages.

UK food and drink manufacturers know better than most how difficult it is to bring new procedures on products, when a country is reliant on them.

Changes to de-minimis thresholds

Any goods entering the US currently, under a value of $800, are not subject to any duty charges. That accounts for over 92% of arrivals into the US, above 1 billion packages a year.

That is very high compared to the global average, and there’s plenty of conversation about whether it should be significantly lowered. In the UK the value is £135, whilst in the EU it is €150.

Whilst it’s widely expected any action taken is to clamp down on low-value, high-quantity ecommerce shipments, some UK businesses need to be aware of changes. Any lowering of the rate, to a similar level seen in the UK or EU could bring some shipments into customs duty fees.

Exactly how the UK-USA trading relationship will develop over the coming years is not known. Put simply, the UK remains keen on warmer relations with the US. But the US has an extremely popular protectionist agenda currently, which has just helped win an election for the incoming Trump Administration. They know protectionist policies, such as tariffs, are popular.

Now, more than ever, its essential you have an experienced and informed logistics provider and customs broker for shipments involving the US. At WTA we are perfectly positioned, with both a UK and US office, full visibility platform and 110+ years experience in freight. To remove the burden of trade between the UK and US, reach out today.

For more information on how the US election result could influence logistics, see here. Alternatively, we have an article on what the UK election means for logistics and trade here.