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Donald Trump has shifted the focus of trade negotiations, making a deal with the UK a secondary priority, as reported by sources familiar with the situation. This change poses challenges for British officials who are striving to meet their mid-May deadline.
According to insiders, US officials are dividing trade discussions with over a dozen countries into three distinct phases, placing the UK in either the second or third phase of negotiations.
A trade agreement with the US is considered highly beneficial for British negotiators, who have also made significant progress toward separate deals with the EU and India recently.
However, UK officials are concerned that a potential agreement with the EU, which they anticipate finalizing during a summit on May 19, might complicate their negotiations with the Trump administration, known for its critical stance on European trade practices.
One source indicated, “The US has now determined to sequence its trade negotiations into three phases. While the UK will not be included in phase one, there remains the possibility for involvement in either phases two or three.”
A spokesperson from the business department stated, “The US is an essential ally, and discussions on an economic prosperity agreement that enhances our existing trade relationship are ongoing. We are committed to a calm and steady approach, as a trade war benefits no one.”
The White House has not provided a comment on these developments.
Several weeks ago, British officials presented a draft trade agreement to their US counterparts, prior to the president’s significant tariff declaration. After this announcement led to a failure in securing an exemption for the UK, British officials redirected their focus to a self-imposed goal of achieving an agreement by May 19.
Despite earlier intentions, the UK’s negotiation landscape has become increasingly uncertain since the tariff announcement. Reports suggest that US officials are now demanding that the UK lower its food quality standards to facilitate imports of American beef and chicken, a move the current Labour government has firmly opposed.
The proposed agreement from the UK could involve reducing its digital services tax, which primarily affects major US tech firms, in exchange for lower tariffs on steel, aluminum, and vehicles. Additionally, Rachel Reeves, the Chancellor, has suggested that reducing the 10% tariffs on US cars could serve as an enticing offer.
Recently, the Trump administration opted to categorize its negotiations with 17 countries into three groups, assigning each a week for discussions. This new strategy was first reported by the Wall Street Journal. Talks are required to conclude by July 8, considerably later than the UK’s timeline.
Sources have indicated that UK officials have been advised that the primary focus will initially be on negotiations with Asian nations, with South Korea prioritized.
US Treasury Secretary Scott Bessent indicated that countries like India, South Korea, and Japan “have shown enthusiasm in terms of advancing trade agreements.”
Furthermore, he criticized European nations for imposing digital service taxes on US corporations, advocating for their removal. While the UK government has offered to lessen the tax burden, it stops short of complete elimination.
Despite the recent changes in US negotiation strategies, British negotiators remain optimistic about continuing dialogues, albeit in a less formal capacity in the coming weeks.
One government source described the US approach as “makeshift and unpredictable.” Another noted that communication has persisted in recent days, notwithstanding the phased negotiation schedule.
In contrast, the UK is progressing better with both India and the EU.
Negotiators conducted crucial discussions with Indian representatives, following comments from Piyush Goyal, India’s trade minister, who observed at a roundtable in London that agreements on 25 out of 26 points of contention had been secured.
While UK officials aimed to finalize the agreement on that Tuesday, sources indicated that no consensus was reached regarding national insurance contributions. This issue has proven problematic due to Delhi’s apprehension that Indian nationals working temporarily in the UK on business visas have to pay national insurance even though they are not eligible for UK pensions or social security benefits.
It is anticipated that at least one additional round of negotiations will be necessary to finalize any arrangement. Discussions are also underway about a potential visit from Keir Starmer to India later this year, contingent upon reaching an agreement.
In a related development, British ministers, including Cabinet Office Minister Nick Thomas-Symonds and Business Secretary Jonathan Reynolds, convened with Maroš Šefčovič, the EU trade commissioner, signaling potential progress on a UK-EU agreement.
Šefčovič tweeted about a productive dialogue focused on ensuring balanced trade relationships, particularly in light of new global challenges.
Recent reports indicate that Brussels might be ready to offer significant concessions regarding its youth mobility scheme proposals to facilitate a deal, including limiting work visas to a span of 12 months and narrowing down the sectors in which EU citizens can be employed.
Nonetheless, experts warn that plans to harmonize British agricultural standards with those of the EU could hinder concessions regarding US requests for alignment with their regulations.
Anand Menon, director of the think tank UK in a Changing Europe, expressed to MPs that “If Americans demand the removal of certain regulations that restrict access for their goods to our market, this would contradict the requirements needed to secure a deal with the EU.”
Source
www.theguardian.com