Britain has accepted strict U.S. security “require” for the steel and pharmaceutical industries in a trade deal with Donald Trump, which diplomats see as a template for Washington to push other partners to exclude China from strategic supply chains.
Thursday’s deals provided tariffs for both sectors, but only under the conditions of the UK “quickly meeting our supply chain safety requirements” and “ownership of related production facilities”.
British officials said the rule applies to all third countries, but acknowledged that Trump showed China was the expected target.
As industry groups try to shed light on the nature of U.S. demands for supply chain security and ownership, trade experts believe the deal shows that the Trump administration is stepping up long-term demands to limit Chinese investment to strategically important commodities.
"Washington hopes that Britain and other countries will open up books and eventually get rid of China's trade and investment, especially in sensitive areas such as steel," said Allie Renison, a former UK Trade Department official.
Within seven weeks of Trump's announcement of global import tariffs on April 2, he hurriedly sorted out five pages of text of U.S. accounted transactions, noting that tariff relief for UK products will depend on the so-called Section 232 investigation - Exploration to determine the impact of a particular import and how it affects U.S. national security.
It added that the U.S. plan to reduce UK tariffs is based on “common national security priorities” and its plans to “balance transaction relations” as the country.
Sam Lowe, head of trade at consulting firm Flint Global, said he hopes “to see similar conditions in other transactions, especially in export hubs in Southeast Asia such as Vietnam and Cambodia.”
But senior EU trade officials say the conditions related to China could seriously affect their efforts to agree to the group's own deal with Washington.
Two officials in talks with the Trump administration told the Financial Times that the group will work to replicate this economic security element of the U.S.-British trade agreement.
"There is no unity in how to get close to China," an official said of 27 EU members.
The Labor government has rejected the "complete nonsense" allegations from opposition conservatives that this week's deal also provided tariff relief for British aluminum, giving Washington a "veto" on its supply chain.
"There is no veto on Chinese investment, and that's not the purpose of this trade deal," Darren Jones, chief secretary of the Treasury, told Times Radio.
A British official said: "Given that the UK's tariffs will be much lower than the rest of the world, the United States does not want to be a place where a country or company can export the rules to the United States through the UK. That details will be passed."
Renison said at consulting firm SEC Newgate that the U.S. demands are aligned with the accelerated trend, noting that the Biden administration has requested a British audit of the UK before raising Trump's previous steel tariffs.
She said that if the final agreement between the UK and the US (which will be subject to further negotiations) makes the UK-US trade attitude more comprehensively consistent, then Beijing will likely retaliate in some form.
The UK industry groups said they were pushing for more information from the government, but there was no immediate indication of what our proposed tariff reduction or supply chain requirements might be.
The UK pharmaceutical industry insider said the final term will depend on the national security impact of the U.S. investigation results announced in April on drug imports.
"Obviously, further negotiations will be held between the United States and the United Kingdom after Pharmaceutical Article 232 ends," One said.
UK Steel is the industry lobby group (UK Steel) highlighted the lack of clarity in the five-page text, including no mention of any reduction to zero in tariffs, as well as issues on supply chain conditions, and proposed the application of quotas.
“The terms of the deal highlight many basketballs before the UK Steel sector can see the benefits of this deal,” said British Steel. “To fully assess the impact on our industry, we will need to fully understand the supply chain conditions that need to be met, how to define quotas and when they will take effect.”