Overview
China has strongly criticised the recent trade deal between the United Kingdom and the United States, warning that the agreement could be used to push Chinese products out of British supply chains. The criticism comes at a delicate time as the UK seeks to improve ties with Beijing while also strengthening economic ties with Washington.
Key Points of the US-UK Deal
• Tariff Reductions:
• The deal reduces punitive US tariffs on UK steel and car exports.
• However, a baseline 10% tariff on most British goods remains in place.
• Security Conditions:
• Tariff relief is conditional on the UK meeting US requirements on supply chain security and ownership of production facilities.
• These clauses are believed to be specifically aimed at reducing Chinese involvement in UK supply chains.
• US National Security Provisions:
• The agreement references Section 232 investigations, which assess the impact of foreign imports on US national security.
China’s Reaction
• Condemnation of the Deal:
• China’s Foreign Ministry stated that international agreements should not harm the interests of third parties.
• Beijing views the deal as an effort to isolate China from global supply chains.
• Strategic Concerns:
• Chinese officials see the inclusion of security conditions as a direct threat.
• Beijing is accelerating efforts to remove foreign components from its own supply chains in response.
• Warnings to the UK:
• Chinese researchers and advisers have warned that London risks damaging relations with China.
• They consider the US-UK deal’s provisions a “poison pill clause” worse than tariffs.
US-China Trade Truce
• 90-Day Agreement:
• The US and China have agreed to temporarily reduce tariffs for 90 days.
• US tariffs on Chinese imports have been reduced from up to 145% to around 40%.
• China has lowered its retaliatory tariffs on US goods, including energy and agriculture, from 125% to 10%.
• Further Reductions Possible:
• Tariffs could fall further if an agreement is reached to halt the flow of fentanyl precursors from China to the US.
UK’s Position
• Balancing Act:
• The UK government insists the US trade deal secures thousands of jobs and sets the stage for future trade growth.
• It maintains that trade and investment with China remain important and is committed to engaging with China in key global areas.
Knock-On Effects
• Diplomatic Strain:
• The deal could undermine the UK’s diplomatic efforts to rebuild relations with China.
• Beijing may apply pressure on the UK in future trade discussions.
• Supply Chain Fragmentation:
• Encouraging decoupling from Chinese suppliers could lead to higher production costs in the UK.
• China may accelerate its own de-globalisation efforts, affecting global trade flows.
• Geopolitical Risk:
• The UK risks being caught in the middle of growing US-China tensions.
• Future deals with either side may come with higher political and economic costs.
Conclusion
The US-UK trade deal may have offered short-term economic wins for Britain, but it has also complicated its geopolitical landscape. With China responding sharply and global supply chains in flux, the UK faces a challenging road ahead in maintaining balanced relations with both superpowers.
