U.S.-U.K. trade deal: From Ford to McLaren, steel to beef, impact to be limited, says freight CEO
For most U.K. importers, the deal terms disclosed to date would not affect the majority of products, Andy Abbott, CEO of niche ocean liner company Atlantic Container Line, tells CNBC. "A lot of this deal is smoke and mirrors," Abbott said. "What we heard today is just noise for most U.K. imports. It doesn't affect the majority of products."
For one, he said the U.K. government is not weakening its food standards on meat imports, so any hormone-treated beef from the U.S. "is not on the table."
The National Cattlemen's Beef Association called the deal a "tremendous win," in a statement on Thursday, but the US Meat Export Federation said it needed more details.
In autos, U.K.-manufactured cars are on the upper end of the pricing spectrum from automakers including Lotus, Rolls-Royce, Bentley, McLaren, Jaguar Land Rover, and Mini. So, while the deal will soften the blow for luxury car companies, "I don't see anyone moving from a British car to a Ford because of a 10% tariff," Abbott said.
A separate deal for the U.K. when it comes to steel tariffs could be good news for U.S. companies like industrial equipment maker Cummins, and high-tech steel importers in the aerospace and auto sectors, Abbott said.
A fact sheet from the White House calls for an alternative to the tariffs on steel and aluminum for the U.K. It also detailed a plan for the first 100,000 vehicles imported from U.K. car manufacturers each year to face a 10% rate, and any additional vehicles a 25% tariff. And it estimates a $5 billion opportunity for farm exports, including $700 million in ethanol and $250 million in beef and other ag products.
But with the 10% tariffs as a baseline, Abbott says most British products imported to the U.S. are likely to get more expensive. "The news today may prompt U.S. importers of U.K. products to raise prices sooner rather than later, as they assume no relief below the 10% tariff level is coming," he said. "Most have been swallowing the extra cost until now."
United States Trade Representative Jamieson Greer said on CNBC on Thursday that this deal is the framework other countries should look to as a model, with the U.K. the sixth-largest economy in the world, and is "the exact type of deal we should be making."
But Abbott's view of the deal's impact matches that of trade and market experts, such as Josh Lipsky, Atlantic Council senior director, who told CNBC on Thursday that the deal was limited in scope, and a "very small win."
"Forty days out from 'Liberation Day' and the first win is U.S.-U.K. ... it's not great news," Lipsky said. He said it's a win for the U.K. to say it was first to reach a deal, but aside from that, he said the 10% baseline tariffs still in place are a sign that higher tariff rates stay on for longer.
Oxford Economics said in an analysis on Thursday that with the baseline 10% tariff untouched, "tariff rates will be in the double digits for the foreseeable future." It added that anyone hoping for a major de-escalation in the trade war wasn't given any reason to believe this would spur it, and that "the lack of specifics suggests those headline figures could be spread over many years, and will include some purchases that would have been made anyway."
There had been a surge in trade from Europe to the U.S. since April after Trump announced a pause on reciprocal tariffs for countries other than China, but those volumes have pulled back to more normal levels, Abbott said.
The European Union launched a trade dispute against the U.S. tariffs at the World Trade Organization on Thursday.
"The car carriers are canceling sailings now due to reduced volume," said Abbott, who added that his company has not cancelled sailings because of its niche business carrying oversized cargo, as well as containers, and not cars. "We are now getting space inquiries from European car manufacturers for the first time since Covid," he said.
Recent trade data has shown evidence of a likely drop at East Coast ports following what already occurred at West Coast ports, where Chinese freight shipments and vessel visits have plummeted. The impact of the vessel cancellations coming to the East Coast has not been felt yet, but Abbott said he is expecting a pullback in the middle of May.
"Everything I am seeing indicates that the frontloading from Europe has slowed down after the short surge that followed the 'pause' announcement," he said. "In Europe, the numbers are skewed a bit because of the Easter and May Day holidays, but the volumes now are just 'decent' and not spectacular – very similar to 2024 on U.S. imports."
Abbott said European importers are waiting to see if the pause is extended, and if not, another surge could begin.
"I expect another surge again in early June," Abbott said.
For ACL, shippers can depart the U.K. as late as June 21 and still arrive in time before the current pause ends. "Most are looking at that date as their deadline. So, I don't expect anything unusual to occur before then unless some new proclamation is made," he said.
While many U.S. exports to Europe remain healthy, including construction equipment, Abbott said autos are an exception. "What is troubling is we are seeing a big cargo hold on automobiles bound for Europe. The car companies cannot swallow a 25% tariff, and most consumers won't shell out an extra 25% for a new car."
Abbott says one auto segment he is closely watching is the transport of used cars. There is some evidence of Americans buying more used cars instead of spending more on imports. A key used car price index hit its highest level since 2023, according to data released this week. Abbott said many ex-rental cars and leased cars end up getting shipped to West Africa, and it is a trade pattern that could change. "We have seen no changes in booking volume yet, but there are a lot of concerns from the traders about higher prices and reduced available volume in the months ahead," he said.
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