If the recently inked United States/United Kingdom trade deal is any proxy on what Australia or other global economies can expect from their ongoing negotiations with the U.S., don’t hold your breath. That’s the conclusion of AMP chief economist Shane Oliver who has written off what was supposed to be a test case for other deals to follow as a bit of a joke and not a good sign for Australia.
While the “historic deal” with the U.K. is considered a major win for the U.S., it is broadly seen as a loss overall for Britain.
Based on what we know so far, the agreement will cut tariffs on British steel, aluminium and aircraft engine exports to the U.S. down to zero.
Meanwhile, taxes on up to 100,000 British cars exported annually to the U.S. will be reduced from 27.5% to 10%.
“It’s a great deal for both countries,” said Trump in the Oval Office, while Starmer awkwardly joined the media event via speaker phone from a British car factory.
UK was shafted: Opposition leader
Meanwhile, U.K. opposition leader Kemi Badenoch made quick work of reminding the U.K. public that Starmer had been shafted by Trump.
Admittedly, the deal had not been finalised but at face value, it looks to Oliver as if the U.K. had made some bizarre concessions.
“With the U.K. having to buy more US agricultural and industrial products, it’s unclear why it signed up to the deal as the U.K. is still far worse off than prior to Liberation Day,” he said.
Given that the baseline tariffs remaining – producing US$6 billion of revenue for the U.S., Oliver agrees that the terms of the deal are widely considered worse than the access Britain enjoyed to American markets prior to Trump’s ‘Liberation Day’ tariffs.
“The U.S./U.K. trade deal is a bit of a joke and not a good sign for Australia,” noted Oliver who sees little to be gained for Australia from caving in to Trump’s demands.
“The 10% baseline tariff remains in place - suggesting it will for other countries too.”
10% tariff likely to remain
The U.S./U.K. deal suggests to Oliver that the best Australia might hope for is relief from the 25% tariff on steel and aluminium (and any future tariffs on pharmaceuticals and movies) but the 10% tariff will remain.
Assuming that’s the case, he said there’s little point in Australia giving anything up to the U.S., like an easier biosecurity or social media laws.
Ironically, despite the Liberation Day reprieves and various backflips on policy globally, the amount of tariffs being charged on imports coming into the U.S. remains around 22% - back to levels from early last century.
Meantime, while financial markets have recovered somewhat from initial tariff shocks, Oliver believes it’s still too early to gauge whether major corrections for the share markets are now behind it.
What’s fuelling fear of further share market shocks are Trump’s recent comments about take it or leave it offers on tariffs.
His comments that countries with surpluses are “going to pay a 25% tariff or a 30% or a 50%…” suggest that there is a high risk of Trump throwing another hissy fit.
Knock-on effect
Trade deals aside, Oliver said the real risk to Australia comes not directly from tariffs on our exports — but from the threat to global growth, especially in China and Asia, which will likely result in less demand for our exports.
Beyond Australia’s single largest export to the U.S., meat (US$4 billion), the second biggest export is pearls, precious stones and metals, worth US$2 billion.
Pharmaceutical products are the third biggest export, worth US$1.4 billion.
While Trump decided not to exclude Australia from the baseline 10% impost last month, Labor is still working to secure an exemption from blanket U.S. tariffs.
Meanwhile, trade negotiations with some countries, like Japan and Europe, don’t appear to be going so smoothly.
With that in mind, the market will be looking for clues from U.S./China talks, which according to Treasury Secretary Bessent haven’t advanced much.
There are reports that Trump is targeting lowering China tariffs below 60% as a first step.
